On 12 February 2025, President Donald J. Trump signaled his administration’s approach to foreign investment policy with a presidential memorandum, “America First Investment Policy” (The Policy) Among the most significant priorities, The Policy directs the Committee on Foreign Investment in the United States (CFIUS or the Committee) to ease foreign investments by allied and friendly countries and to further restrict Chinese investment in critical sectors. This policy will substantially revise CFIUS’s approach under the Biden Administration by, among other things, instructing the Committee to rationalize the process for mitigation of national security threats. The Policy in general signals a shift to a more flexible atmosphere for investors from countries that the United States considers to be allies and partners, while requiring more in-depth reviews of investments from adversarial countries.

Key Changes to CFIUS and Investment Policies:

1. Facilitating Investments From Allies

Streamlined Processes

To encourage investments from allied nations, The Policy proposes a “fast-track” process for investors from key partner countries (to be identified). This initiative aims to ensure that such investments directly bolster US economic growth and innovation. Previous attempts to streamline friendly country investments through the “Excepted Investor” provision in the CFIUS regulations have been narrowly tailored and challenging to navigate.

A more expansive process could significantly impact CFIUS reviews, especially since most transactions over the past five years have involved investors from countries such as the United Kingdom, European Union member states, Canada, Japan, and the United Arab Emirates. The policy seemingly aims to create clearer guidelines, which might better distinguish between genuine national security threats and investment opportunities that pose limited risk. 

The policy stipulates that the “fast-track” process will include conditions to prevent foreign investors from friendly countries partnering with investors from China. 

For instance, companies engaged in significant joint ventures or joint research operations in China, particularly those that may benefit Chinese military development, may face exclusion from fast-track treatment.

Crucially, the policy directs “more administrative resources” toward facilitating investments from key partner countries to avoid the “overlay bureaucratic, complex, and open-ended ‘mitigation’ agreements for US investments from foreign adversaries.” 

Additionally, the policy directs the federal government to expedite environmental reviews for any investment over US$1 billion.

2. Encouraging Passive Investment From All Sources

The policy appears to direct CFIUS to reverse a trend we have observed in the past four years toward increasingly difficult reviews of strictly passive investments, with no control or access to material nonpublic technical information, especially investments from China with no apparent connection to or control by the Chinese government. The policy notes that “the United States will continue to encourage passive investments from all foreign persons.” To the extent this includes investments from China or other countries of concern this could be a significant development in encouraging more access to capital for many US companies.

3. Enhanced Scrutiny of Chinese Investments

At the same time, the policy does signal additional restrictions on Chinese investments in key areas:

Targeted Sectors

CFIUS is instructed to intensify its review of foreign investments, particularly those originating from countries the US government considers to be adversaries or potential adversaries, such as China, in sectors such as sensitive technology, critical infrastructure, healthcare, agriculture, energy, and raw materials. 

Real Estate

The policy emphasizes protecting US farmland and properties near sensitive facilities, and aims to expand CFIUS’s authority over “greenfield” investments to prevent foreign adversaries from gaining control over essential US assets. As a result of the Foreign Investment Risk Review Modernization Act of 2018, CFIUS jurisdiction was already expanded to real estate acquisitions and greenfield developments within proximity of certain military bases and other sensitive facilities such as maritime ports and airports.

4. Restrictions on Outbound Investments

Sensitive Technologies

According to the policy, the Administration is considering new or expanded restrictions on US outbound investments involving China, especially those related to sensitive technologies like semiconductors, artificial intelligence, quantum computing, biotechnology, hypersonics, and aerospace. These outbound investment restrictions will likely build on the Outbound Investment Program regulations under Executive Order 14032, which came into effect on 2 January 2025, and already restrict or requirements notification of investments in Chinese entities engaged in certain semiconductor, quantum, and AI development and production activities. 

5. Increased Securities Oversight

The policy further expressed a policy emphasis on “auditing of foreign companies on US exchanges” including “reviewing their ownership structures and any alleged fraud.” Presumably, this would entail greater scrutiny to ensure that foreign issues listed on US exchanges accurately and full identify their direct and indirect shareholders. Although not mentioned, presumably the focus will be on Chinese companies, which will build on enhanced scrutiny of auditing and reporting methodology of Chinese issuers on US exchanges.

Implications for Investors

Opportunities for Allied Investors

Overall, the policy signals a shift in US policy to favor investments from allied and other nonadversarial nations, especially the “NATO plus” countries. Such investments could benefit from fast track review process as well as increased scrutiny of China and other countries considered by CFIUS to be of concern. However, such investors may still attract scrutiny if they maintain significant commercial operations in China, especially those in the critical technologies space. Rulemaking to implement the policy may be crafted in such a way to discourage friendly country investors from continuing significant operations in China. 

Increased Compliance Requirements

Deals that involve any connections to Chinese investors should anticipate more rigorous CFIUS reviews. The scope of industries that may be considered to have a national security impact will also be broader, to the point that almost any China-connected investment should be carefully assessed for CFIUS considerations. The need to drill down into any potential connection to investors from China will be crucial for transactions aiming to benefit from the more open environment for allied and partner countries.

Strategic Investment Planning

US entities considering outbound investments in sectors like technology and infrastructure should stay informed about potential restrictions to avoid unintentional violations.

Next Steps

While some of the policy changes in the policy can be accomplished through a shift in enforcement priorities at CFIUS and other relevant agencies, other changes will require regulatory rule writing and even legislative changes. Proposed regulations should be issued shortly via an advance notice of rulemaking, which may give interested parties the opportunity to submit comments on final rules.