Trump’s Investment Policy: Clarifying and Confounding

Last month, President Donald Trump unveiled his America First Investment Policy in a memorandum to his senior officers. The memorandum addressed the operations of the longstanding Committee on Foreign Investment in the United States (CFIUS), which monitors inbound investments and acquisitions by foreign parties, and the new Outbound Investment Security Program, established at the end of the Joe Biden administration to curtail U.S. collaboration with China-linked businesses in certain technology areas.

The memorandum does not itself alter CFIUS or outbound-investment regulation, and much of it simply restates existing policy. It does, however, mandate noteworthy changes to CFIUS’s operations and, most significantly, formally reorients U.S. investment policy to counter China.

The focus on China is clarifying, as U.S. investment policy for the last eight years has been inconsistent: although the U.S. government rhetorically has encouraged foreign investment, CFIUS, in particular, has created significant impediments for investors regardless of nationality.

The memorandum is also confounding, though, because the mechanisms it proposes for countering China—CFIUS and the expansion of unilateral outbound-investment restrictions—are not sensible tools, even if one believes (against preliminary evidence) that restrictive investment policy can be effective in U.S. competition with China.

If one does believe that, then a straightforward ban on investment linked to China—e.g., where a European investor is Chinese-owned or has 75 percent of its revenue from China—could avoid the drag CFIUS creates for other investments.

Outbound investment restrictions, and the proposed expansions of the sectors covered under those rules, might be sensible if broadly applied with international partners. But the Trump administration has eschewed multilateralism, making outbound restrictions senseless.

The Evolution of CFIUS

Created in 1975, CFIUS operated in its first four decades as a narrow exception to the open-investment policy articulated by President Ronald Reagan. CFIUS was a gap-filler, used on a case-by-case basis, to address concerns not addressed by controls on the export of U.S. technology. All of those restrictions were viewed as narrow deviations from the desirable free flow of investment and trade. Aided by the open-investment policy, the United States has become, by far, the largest recipient of foreign investment.

Prior to CFIUS changes in the first Trump administration, the committee had wide authority to block deals of potential concern. But CFIUS filings were not mandatory. Rather, if parties to the deal thought it could create national security concerns, then they often made voluntary filings to obtain CFIUS approval and a “safe harbor” against adverse CFIUS action. The number of annual CFIUS filings typically was roughly a hundred.

The 2018 CFIUS amendments constituted a sea change. Motivated by concerns about Chinese investment and the possible extraction of U.S. technology or data, Congress expanded CFIUS’s authority and budget, and CFIUS established mandatory filing rules. Notably, triggers for mandatory filings focus on the U.S. business receiving the investment and are largely agnostic regarding the investor’s identity. Because those triggers are arcane and often found in low- and high-tech businesses alike, many thousands of transactions annually require specialized legal reviews to determine whether a CFIUS filing is required. A $1 million German investment to obtain a 20 percent stake in a U.S. online-quiz company, for example, requires specialist review.

Beyond mandatory filings, CFIUS has maintained the discretion to review a much broader array of transactions not subject to the mandatory filing rules. It has used that discretion primarily to follow transactions involving China-linked parties. CFIUS frequently has blocked transactions and forced divestment by those parties, generally at the tail end of lengthy CFIUS reviews.

Finally, under the outbound investment rules that became effective in January 2025, U.S. investors are restricted from transactions with China-linked parties operating in any of three areas: semiconductors, quantum computing, and artificial intelligence, each with complex definitions.

While the scope of these outbound investment rules is narrow, the effects are broad: it generally is not evident whether a company anywhere in the world has links to China (such as Chinese ownership), and the artificial intelligence (AI) category in particular cuts across industries. Accordingly, a potential U.S. investor in a robotics company based in San Francisco or Tokyo often must consult specialists to determine if the robotics company has links to China and uses AI.

So, these CFIUS and outbound investment regimes are complex and costly, not only for foreign parties but also for U.S. businesses. Whether they are sensible turns on whether they are well calibrated to achieve important national security benefits. President Trump’s recent memorandum aims for a new calibration.

Virtue in Conceptual Clarity

The memorandum is clear that U.S. investment policy is now a tool for countering China. Concerns about China have animated CFIUS for a decade, but many CFIUS actions in the last eight years—notably creating mandatory filing rules—have evinced a broader skepticism of foreign investment. The memorandum does not contemplate removing the mandatory filing rules but does suggest that broader skepticism of foreign investment (e.g., from Europe, Japan, and elsewhere) is unwarranted. Under Trump’s plan, investors that demonstrate the absence of ties to China can be fast tracked through the normally lengthy CFIUS process. Fast tracking, though, might not be feasible because much of the CFIUS process involves a searching inquiry into the investor’s ties to China. It is not clear that CFIUS can move meaningfully faster in that regard.

With respect to outbound-investment regulations, the memorandum states that the Trump administration will consider expanding beyond semiconductors, quantum computing, and AI, to include biotechnology and other areas of strategic importance.

Former Commerce Secretary Gina Raimondo argued that trying to constrain China’s technological development is a “fool’s errand,” and that the only way to compete is to “run faster.” The recent Chinese development of DeepSeek, an AI technology rivaling U.S. offerings, is one data point in support of her view. The American advantage is not stifling competition elsewhere but drawing inward global capital, talent, and entrepreneurial companies in the spirit of further innovation—that is to say, “running faster.” That is not the approach evinced by the Trump memorandum, but at least the Trump approach has the virtue of conceptual clarity.

Confusion in Implementation

On implementation, though, the memorandum seems confused. It is nonsensical to use CFIUS to enforce the suggested ban on Chinese investment (a ban that would exclude passive investments involving small minority stakes with no special rights). The CFIUS process is a byzantine, case-by-case, expensive approach that inflicts needless costs on foreign investors and U.S. businesses alike for thousands of transactions annually.

The United States has flatly banned investment from Cuba and Iran for decades; while the merits of this approach are up for debate, it at least avoids drag on transactions with other countries. CFIUS could retain discretion to block other transactions of concern while eliminating most mandatory CFIUS-filing triggers and minimizing friction vis-à-vis foreign investors generally.

With respect to outbound-investment regulations, the memorandum urges expanding the scope of restricted technologies. But the outbound-investment rules only apply to U.S. businesses. Because U.S. dollars can be replaced by euros, yen, or money flowing to and from other countries, limiting money flowing to China-linked businesses is feasible only if the limitations are multilateral.

The Biden administration tried but failed to get other countries to implement outbound-investment restrictions. The Trump administration generally has eschewed multilateralism. Unilateral outbound-investment restrictions only hurt U.S. investors, and unilaterally broadening the outbound-investment restrictions will only hurt U.S. investors more.

Conclusion

The Trump investment policy is conceptually clear and could seem sensible if one believes precluding Chinese investment can aid in competition against China. Regardless of one’s view on this critical issue, though, the memorandum offers little hope of coherent implementation.

Stephen Heifetz is a former U.S. government national security official and currently a partner at the law firm Wilson Sonsini Goodrich & Rosati. The views expressed here do not necessarily reflect those of his law firm or its clients.