White House Releases “America First Investment Policy” Memo Outlining President Trump’s Approach to Foreign Investment

^{Grace Hochstatter (White & Case, Law Clerk, Washington, DC) contributed to the development of this publication.}

On February 21, President Trump issued the “America First Investment Policy” National Security Presidential Memorandum (“NSPM”) which outlines the Administration’s approach to foreign investment in the United States. The NSPM emphasizes an open foreign investment environment while imposing restrictions on foreign investments in proportion to their degree of independence from U.S. foreign adversaries, particularly the People’s Republic of China (“PRC”). The NSPM includes directives for expedited review of investments from allied and partner nations, reduced reliance on open-ended mitigation agreements, and the utilization of legal tools like the Committee on Foreign Investment in the United States (“CFIUS”) to restrict foreign adversary-affiliated investments. The NSPM also notes the Administration is considering implementing further restrictions on U.S. outbound investments in certain strategic sectors. While new rules and other measures are necessary for implementation, the NSPM is a harbinger of a significant shift in foreign investment review under the Trump Administration.

Key Objectives and Principles

The NSPM underscores the importance of creating jobs and wealth in the United States through a robust and open investment environment. However, it also highlights the risks posed by investments from foreign adversaries, particularly the PRC, which the NSPM cites as seeking to acquire cutting-edge technologies and strategic assets (e.g., food supplies, farmland, minerals, natural resources, ports, and shipping terminals) and accordingly presents a threat to U.S. economic and national security. The NSPM emphasizes the Trump Administration’s dedication to innovation and investment in the United States by permitting foreign investment in proportion to foreign investors’ “verifiable distance and independence from the predatory investment and technology-acquisition practices of the PRC and other foreign adversaries or threat actors.” The NSPM identifies “foreign adversaries” as the PRC (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia, and Venezuela. The inclusion of Hong Kong and Macau may foreshadow removal of any remaining favorable treatment in U.S. regulations for those special administrative areas of the PRC.

Policy Directives

President Trump’s NSPM outlines the following directives, which may telegraph forthcoming policy, regulatory, and/or statutory changes:

1. Foreign Investment Environment: The Trump Administration aims to ensure the United States remains the top destination for foreign investment, especially from allies and partners. Investments in critical technology, infrastructure, and sensitive areas by foreign investors will be eligible for favorable treatment based in part on the foreign investor’s independence from foreign adversaries and other threat actors.
2. Expedited Processes: The NSPM proposes that an expedited “fast-track” process will be established for investments from allied sources in advanced technologies, subject to security provisions that include requirements to avoid partnering with foreign adversaries in corresponding technology sectors.
3. Reduction of Administrative Burdens: The Administration will look for ways to increase government efficiencies by ending the use of “overly bureaucratic, complex, and open-ended ‘’mitigation’ agreements for United States investments from foreign adversary countries.” According to the NSPM, mitigation agreements should generally be time-limited and consist of concrete actions to be completed.
4. Environmental Reviews: The Administration will aim to expedite environmental reviews for investments exceeding $1 billion.
5. Promotion of Passive Investments: The Administration will “welcome and encourage passive investments from all foreign persons.” This includes non-controlling stakes and shares with no voting, board, or other governance rights and that do not confer any managerial influence, substantive decision making, or non-public access to technologies/technical information, products, or services.
6. Expanded CFIUS Jurisdiction: The Administration will seek to strengthen CFIUS’s authority over greenfield investments, restrict foreign adversaries’ access to U.S. talent and operations in sensitive technologies (especially artificial intelligence), and expand the remit of “emerging and foundational” technologies addressable by CFIUS.
7. Legal Instruments and Reviews: The Administration plans to utilize CFIUS and other legal tools to restrict PRC-affiliated investments in strategic sectors, as well as conduct reviews of financial auditing standards and investment structures under the Holding Foreign Companies Accountable Act to “review the variable interest entity and subsidiary structures used by foreign adversary companies to trade on United States exchanges” and protect U.S. investors.
8. Outbound Investment Restrictions: The Administration is weighing the benefits of new or expanded restrictions on U.S. outbound investments in sectors critical to the PRC’s Military-Civil Fusion strategy, including semiconductors, AI, quantum computing, biotechnology, hypersonics, aerospace, advanced manufacturing, and directed energy.

Implementation

Importantly, the NSPM must be implemented consistent with existing laws—including the CFIUS statute passed by Congress—and will be implemented using existing regulations (to the extent permitted by those regulations) or by new regulations promulgated by the U.S. Department of the Treasury and other agencies. The Secretary of the Treasury, in consultation with other key departments, will be responsible for implementing these policies through rule-making and other actions. The Environmental Protection Agency will oversee the expedited environmental reviews, and the Department of Labor will update fiduciary standards for investments. In addition, the NSPM may spur Congress to adopt new laws to further the NSPM objectives.

Implications

This NSPM represents a significant policy shift from the Biden Administration. While the Biden Administration also scrutinized PRC-related transactions and implemented the first-ever outbound investment screening mechanism, the Biden Administration relied heavily on the existing CFIUS process, including with respect to mitigation agreements and compliance obligations. In light of the new Administration’s policy, foreign investors should anticipate the following:

• Limited Mitigation Agreement Use: The Trump Administration is seeking to implement an up-front process with objective standards that will result in approval of investments in critical U.S. sectors by investors that have demonstrated pro-U.S. policies and adequate safeguards already in place. CFIUS mitigation agreements are generally expected to be more tightly focused and with an expiration date. For those agreements that cannot sunset within a set timeframe, instead of lasting into perpetuity, they may include a “re-look” provision after a period of years, with a presumption of expiration. This would effectively require CFIUS to closely review mitigation agreements to ensure they are necessary to protect national security.
• Continued Reliance on CFIUS Statute and Regulations: The NSPM is generalized guidance intended primarily for the political leadership at CFIUS member agencies. CFIUS staff-level officials are still required to follow the CFIUS statute passed by Congress (Section 721 of the Defense Production Act of 1950, most recently amended by the Foreign Investment Risk Review and Modernization Act, or FIRRMA) and, until any amendments to the regulations are made, the present CFIUS regulations. This means, for example, that there could be exceptions to the general policy of disfavoring complex mitigation agreements, especially if the investor is not from the PRC (or other foreign adversary) and the transaction nonetheless raises serious national security concerns.
• Considerations for Fast-Track-Seeking Investors: Since eligibility for expedited investment reviews will partially depend on their level of separation from the PRC and other foreign adversaries, foreign investors will need to consider any foreign adversary-related affiliations. It is currently unclear exactly how the Administration intends to measure such eligibility and what actions may be taken to implement this directive (e.g., issuing guidance under existing CFIUS regulations regarding the declaration process or seeking to adopt new regulations with a separate process).
• New CFIUS Regulations: Depending on the scope, some expansions in CFIUS’s authority over greenfield, agriculture, and other investment types would likely require additional rulemaking if not updated legislation. At a minimum, new regulations and/or executive actions are likely forthcoming.
• Potential Increased Scope of the Outbound Investment Security Program (“OIP”): The OIP regulations, which built on measures taken during the first Trump Administration but were issued and took effect during the Biden Administration, limit or prohibit certain outbound U.S. investments to the PRC (including Hong Kong and Macau) that involve quantum information, artificial intelligence, and semiconductors and microelectronics. President Trump’s NSPM specifically indicates additional regulations are being considered to include biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy, and other areas implicated by the PRC’s national Military-Civil Fusion strategy.

Foreign investors and companies seeking foreign investment in the United States should consult qualified legal counsel and remain aware of the increased scrutiny and potential restrictions on investments involving critical U.S. technologies and infrastructure, particularly those with ties to foreign adversaries. Likewise, U.S. investors should be on the lookout for additional limitations on outbound investment in spaces perceived by the Administration as bolstering of the PRC’s military objectives. It is advisable to review current investment portfolios and strategies to ensure compliance with the new directives and forthcoming rulemaking as it is released.

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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