On February 21, 2025, President Donald Trump issued a memorandum outlining "America's investment policy" (the "Memorandum"). This investment policy is part of his "America First Trade Policy," which orders a comprehensive review of US trade and economic policies, focusing on trade deficits, unfair trade practices, and the impact of existing trade agreements. The Memorandum emphasizes US commitment to "maintaining the strong, open investment environment that benefits [the US] economy." And, to ensure that investment is in the national interest, the Memorandum focuses on "[c]ertain foreign adversaries, including the People's Republic of China (the 'PRC')."
The Memorandum begins by outlining the importance of the United States' investment policy to the country's "national and economic security." A key part of this policy is "[w]elcoming foreign investment and strengthening the United States' world-leading private and public capital markets." Through such investments, the United States' "overseas allies" will "support United States jobs . . . innovators, and . . . economic growth." The section cautions, however, that not all investment is "in the national interest:" "[c]ertain foreign adversaries, including the [PRC], systematically direct and facilitate investment in United States companies and assets,"1 with the goal of "obtain[ing] cutting-edge technologies, intellectual property, and leverage in strategic industries." Noting that the PRC "does not allow United States companies to take over [the PRC's] critical infrastructure," the Memorandum urges that the "United States should not allow the PRC to take over United States critical infrastructure." The Memorandum also argues that "PRC-affiliated investors are targeting" key US sectors and resources and "exploiting United States capital to develop and modernize its military, intelligence, and other security apparatuses." These same Chinese companies "raise capital" through the US securities market.
The Memorandum then proposes numerous policies to address the alleged threats posed by PRC investment in the United States, and vice versa. Regarding the former, the proposed policies include:
- Encouraging strategic investment by:
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- Maintaining an "open investment environment" for US allies and partners "to help ensure that artificial intelligence and other emerging technologies of the future are built, created, and grown . . . in the United States";
- Encouraging "passive investments from all foreign persons," thus allowing US "cutting-edge businesses to continue to benefit from foreign investment capital, while ensuring protection of our national security"; and
- Creating a "fast-track" process to "facilitate greater investment from specified" allies and partners, which in turn will benefit US businesses "involved with United States advanced technology and other important areas." This expedited process "will allow for increased foreign investment subject to appropriate security provisions, including requirements that the specified foreign investors avoid partnering with United States foreign adversaries."
- Restricting certain foreign investors' access to US assets that include "sensitive areas," including critical technology, critical infrastructure, and personal data. These restrictions on access "will ease in proportion to the [foreign investor's] verifiable distance and dependence from the predatory investment and technology-acquisition practices of the PRC and other foreign adversaries or threat actors."
- Exercising all legal avenues available to the United States, including the Committee on Foreign Investment in the United States ("CFIUS"), "to restrict PRC-affiliated persons from investing in" sensitive US sectors. The administration also plans to work with Congress to "strengthen CFIUS authority over 'greenfield' investments,"2 which generally are excluded from CFIUS jurisdiction, further " restrict foreign adversary access to United States talent and operations in sensitive technologies (especially artificial intelligence)," and to broaden the scope of "emerging and foundational" technologies, one of the categories of critical technology under CFIUS regulations.
- Reducing the use of "overly bureaucratic, complex, and open-ended" mitigation agreements. The Memorandum is likely referring to national security agreements, which are negotiated by CFIUS and parties to a transaction to protect critical US assets, technology, and sensitive personal data. Such agreements should be replaced with ones that "consist of concrete actions that companies can complete within a specific time." The Memorandum asserts that this will reduce the strain on administrative resources, thus allowing those resources to focus on "facilitating investments from key partner countries."
Regarding US investment in the PRC, the proposed policies include:
- Using "all necessary legal instruments to further deter United States persons from investing in the PRC's military-industrial sector." Such instruments include "the imposition of sanctions under the International Emergency Economic Powers Act," and actions pursuant to a number of executive orders, issued under not only the first and second Trump administration but also during the Biden administration.
- Conducting a review of Executive Order 14105 of August 9, 2023 (Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern). The review will "build on measures" taken during the first Trump Administration and will "consider new or expanded restrictions on United States outbound investment in the PRC" in certain sensitive sectors. The Administration will also "consider applying restrictions" on certain types of investment. Such investments include "university endowments," with the Memorandum calling on American universities to end their support of "foreign adversaries" through their "investment decisions."
- Establishing "new rules to" prohibit US "companies and investors from investing in industries that advance the PRC's national Military-Civil Fusion strategy," and prohibit "PRC-affiliated persons" from acquiring "critical American businesses and assets."
The Memorandum also says the administration will review whether to "suspend or terminate the 1984 United States-The People's Republic of China Income Tax Convention," which, "along with the PRC's admission to the World Trade Organization and . .. the United States . . . accord[ing] unconditional Most Favored Nation treatment to goods and services of the PRC, led to the deindustrialization of the United States and the technological modernization of the PRC military."
Various US departments and agencies, including the Department of State, the Department of Defense, the Secretary of Commerce, and the United States Trade Representative, are tasked with taking steps to implement the policies set forth in the Memorandum. Foreign investors and companies considering foreign investment in the United States should continue to monitor updates regarding foreign investment under the current Administration. Such investors should also consider the increased scrutiny and potential restrictions on investments involving critical US technologies and infrastructure, particularly those with ties to foreign adversaries. Likewise, US investors should continue to monitor the Administration's actions relating to outbound investment, particularly as to spaces that could assist in the advancement of the PRC's national Military-Civil Fusion strategy.
Footnotes
1. The Memorandum defines "foreign adversaries" to include "the PRC, including the Hong Kong Special Administrative Region and the Macau Special Administrative Region; the Republic of Cuba; the Islamic Republic of Iran; the Democratic People's Republic of Korea; the Russian Federation; and the regime of Venezuelan politician Nicolás Maduro."
2. A "greenfield investment" is when a new business is established in a foreign country from the ground up.
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