President Trump Issues America First Investment Policy Refocusing CFIUS and Outbound Investment Approach

On February 21, 2025, President Trump issued the America First Investment Policy Memorandum, which emphasizes the U.S. commitment to a strong, open investment environment while reshaping the U.S. government’s policy towards inbound and outbound investment. Although the Memorandum makes no immediate changes, future agency actions undertaken to adopt its directives could have a significant impact on the outcomes of Committee on Foreign Investment in the United States (CFIUS) reviews of transactions involving Chinese investors, CFIUS’s process for reviewing investment from allied countries, access to U.S. capital markets by Chinese companies and limitations on U.S. person investment in China.

Key Takeaways

The Memorandum:

• While emphasizing an open investment policy, highlights the Trump administration’s view that economic security is national security and its willingness to use all the available tools to protect American advantages in cutting-edge technologies, intellectual property and strategic industries.
• Indicates a shift in CFIUS’s priorities to focus more resources on restricting investments from “foreign adversaries,” particularly China, and fewer resources on reviewing and entering into “bureaucratic, complex, and open-ended” mitigation agreements with U.S. allied and partner nations.
• Directs the creation of an expedited “fast-track” process to facilitate greater investment from specified allied and partner sources, subject to certain requirements, including that the foreign investors avoid “partnering” with foreign adversaries, which is presumably meant to provide investors an incentive to reduce ties with China.
• Directs Treasury to consider, as part of an ongoing review, expanding restrictions on outbound investment to China into new sectors, including biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy and other areas implicated by the China’s Military-Civil Fusion strategy, as well as expanding coverage over more types of transactions, including publicly traded securities, from sources such as pension funds, university endowments and limited partners in investment funds.
• Orders the expedited environmental reviews for investments in the United States over $1 billion.

Background

CFIUS in recent years has aggressively utilized and broadened its authority to address national security risks related to foreign investment into the United States, including by expanding its jurisdiction over real estate transactions near sensitive government facilities. CFIUS has also closely scrutinized investments from most, if not all, destinations and has been requiring mitigation agreement to clear investments even with investors from allied countries, in many cases.

Treasury also has established a new Outbound Investment Program (OIP) to implement President Biden’s August 9, 2023, Executive Order on outbound investment that regulates investment by U.S. persons in China or Chinese affiliated companies that are involved in semiconductors, quantum computing and artificial intelligence, which is in addition to Treasury’s relatively new authorities that prohibit investment in publicly traded securities of specified Chinese Military-Industrial Complex Companies (CMIC). (See our prior client alert here.)

Furthermore, in the 118th Congress, there were several legislative proposals to strengthen the CFIUS process and expand the restrictions on U.S. person investments in Chinese technology sectors. For example, the Comprehensive Outbound Investment National Security (COINS) Act, introduced by Chairman John Moolenaar (R-MI) of the House Select Committee on the Chinese Communist Party, proposed to introduce a framework to prohibit American capital from being invested in critical sectors of the Chinese military and economy. The COINS Act largely tracked the OIP, but also included additional activities within the scope of prohibited technology and authorized the President to impose sanctions on Chinese individuals or entities engaged in the defense and related materiel or surveillance technology of the Chinese economy. The COINS Act was never passed into law; however, the new Congress may introduce similar legislation to expand outbound investment restrictions.

America First Investment Policies

The Memorandum orders the Secretary of Treasury, in consultation with the Secretaries of State, Defense, and Commerce, as well as the United States Trade Representative and the heads of other executive departments and agencies, to undertake the action below:

• Create an expedited “fast-track” CFIUS process to facilitate greater investment from specified allied and partner sources in United States. This process will allow for increased foreign investment subject to appropriate security provisions, including requirements that the foreign investors avoid partnering with foreign adversaries. Along those lines, restrictions on foreign investors’ access to United States assets, particularly those involving critical technology, critical infrastructure and sensitive personal data, will ease in proportion to their verifiable distance and independence from the “predatory investment and technology-acquisition practices” of China and other foreign adversaries or threat actors.
  • “Foreign adversaries” include China, including Hong Kong and Macau, Cuba, Iran, North Korea, Russia and the Maduro regime in Venezuela. However, current economic sanctions against most of these countries means the Memorandum is largely focused on inbound and outbound investments involving China and Chinese-affiliated companies.
• Establish new rules to stop U.S. companies and investors from investing in industries that advance China’s Military-Civil Fusion strategy and stop Chinese-affiliated persons from buying critical American businesses and assets, allowing only those investments that serve American interests.
• Strengthen the CFIUS review process to restrict Chinese-affiliated persons from investing in U.S. technology, critical infrastructure, health care, agriculture, energy, raw materials or other strategic sectors, as well as expanding CFIUS authority over “greenfield” investments, to restrict foreign adversary access to United States talent and operations in sensitive technologies (especially artificial intelligence), and to expand the scope of “emerging and foundational” technologies, which can trigger mandatory filing requirements. Depending on the scope of these changes, the expansion of CFIUS’s authority may require legislative action.
• Change the mitigation agreements negotiated by CFIUS to resolve national security concerns associated with specific transactions. The Memorandum directs CFIUS to “cease” the use of “bureaucratic, complex, and open-ended” CFIUS mitigation agreements, rejecting “perpetual and expensive compliance obligations” in favor of concrete actions that companies can complete within a specific time.
• Encourage passive investments from “all” foreign persons, indicating that certain forms of investment from China presumably would be permissible.
• Use all necessary legal instruments, including, among others, economic sanctions issued under the International Emergency Economic Powers Act (IEEPA), including prohibition on investing in the publicly traded securities of specified CMIC companies, and the outbound investment restrictions implemented pursuant to Executive Order 14105 of August 9, 2023 (Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern), to further restrict U.S. persons from investing in China’s military-industrial sector.
• Along those lines, consider expanded outbound restrictions in additional sectors of the Chinese economy, including biotechnology, hypersonics, aerospace, advanced manufacturing, and directed energy. This may also include expanding coverage over more types of transactions, including publicly traded securities, from sources such as pension funds, university endowments, and limited partners in investment funds

In addition, the Memorandum orders the administration to (1) expedite environmental reviews by the Environmental Protection Administration (EPA) for any investment over $1 billion in the United States; (2) consider whether to suspend or terminate the 1984 United States-The People’s Republic of China Income Tax Convention, which establishes measures to eliminate double taxation; (3) determine whether adequate financial auditing standards are upheld for companies covered by the Holding Foreign Companies Accountable Act; (4) review the variable interest entity and subsidiary structures used by Chinese companies to trade on U.S. exchanges, which the Memorandum states “limit the ownership rights and protections for United States investors”; and (5) restore the “highest” fiduciary standards required by the Employee Retirement Security Act of 1974 to ensure that foreign adversary companies are ineligible for pension plan contributions.

Finally, the Memorandum hints at potential actions to challenge China’s admission to the World Trade Organization (WTO) and revisit the Most-Favored Nation (MFN) treatment of Chinese goods and services under U.S. import laws. Although the Memorandum does not specify any specific actions with respect to the WTO or China’s MFN status, it notes that those steps, along with the double taxation treaty, “led to the deindustrialization of the United States and the technological modernization of the PRC military,” suggesting that both may be the subject of future actions by the Trump administration.

Implications

Depending on how these policy changes are implemented, the Memorandum could have a significant impact on how the U.S. government regulates cross-border transactions. Companies and investors from “allied and partner” jurisdictions—some of whom the Memorandum notes “have tremendous sovereign wealth funds”—may be able to benefit from the fast-tracked review of investments in the United States, although the magnitude of the benefit will depend on how Treasury implements the condition that the investor not “partner” with China.

Conversely, Chinese companies and investment funds may face an even more rigorous review process, making investments in the United States significantly more challenging. U.S. investors, investment funds and companies seeking to invest or receive investments may soon face expanded investment restrictions that will likely apply to a broader set of sectors and transactions, the details of which we can expect to see proposed at the agency level in the coming months.