On February 21, 2025, the White House released a memorandum titled, “America First Investment Policy” (the Memorandum). The Memorandum describes how this Administration plans to address U.S. national security risks stemming from both inbound investments (i.e., foreign investments into U.S. businesses) and outbound investments (i.e., U.S. investments into foreign businesses and those with close foreign ties).
Inbound investment security is primarily the purview of the Committee on Foreign Investment in the United States (CFIUS), while outbound investment security is the subject of a relatively new “Outbound Investment Security Program,” which became effective on January 2, 2025 (see our previous advisory here).
Unsurprisingly, the Memorandum focuses mostly on the threats posed by the People’s Republic of China (PRC), including Hong Kong and Macau, and the PRC’s Civil-Military Fusion policy. The Memorandum does, however, identify other “foreign adversaries”—namely Cuba, Iran, North Korea, and Venezuela—to be specifically targeted by policy.
Although most of the specific policy statements in the Memorandum are continuations and/or extensions of long-standing, existing U.S. policies related to inbound and outbound investment, the Memorandum does contemplate a few new initiatives that entities involved in cross-border investments should monitor, including the creation of a new “fast-track” mechanism for investments from allied nations, cessation of “overly bureaucratic” mitigation agreements, and expansion of sectors subject to U.S. outbound investment controls.
Key Takeaways
The Memorandum highlights the present Administration’s intent to continue the use of both inbound and outbound investment controls to maintain the United States’s edge over adversaries in emerging technologies such as artificial intelligence (AI) and quantum computing. Accordingly, many of the policies outlined in the Memorandum build on and expand the policies adopted by the Biden Administration as well as the first Trump Administration (see our articles on Executive Orders 14083, regarding the tightening of inbound investment screening, and 14105, mandating creation of outbound investment restrictions).
Specifically, the Memorandum presents a clear intent by the Administration to:
- facilitate easier access to U.S. companies for friendly investors;
- stymie foreign adversary access to key sectors of the U.S. economy; and
- further restrict certain U.S. investments into the PRC.
It remains to be seen how specific rules implementing these policy goals and directives will be scoped and crafted. Nonetheless, investors and companies should expect a likely expansion of rules governing cross-border investments and transactions, and closely monitor new rulemaking by the U.S. Department of the Treasury (specifically regarding CFIUS and outbound investment restrictions) and other economic and national security executive agencies.
The (Re)Stated Policy
The stated central objective of the Memorandum is to preserve an open investment environment while ensuring continued U.S. leadership in AI and other emerging technologies. The Administration will seek to achieve this goal through the following measures:
Facilitate Easier Access to U.S. Companies for Friendly Investors and Investments
- Reduce hurdles for foreign investors seeking access to sensitive U.S. assets in proportion to those investors’ demonstrated lack of ties to the PRC and other foreign adversaries and create a “fast-track” process for investments from specific allied nations, to facilitate increased investment in U.S. businesses involved in advanced technologies. To take advantage of this fast-track, investors will be required to avoid partnering with foreign adversaries.
- We note, though, that this facilitation might be easier said than done. The lengthy CFIUS review process is lengthy due in large part to CFIUS’s searching inquiry regarding investor ties to the PRC, so removing hurdles and “fast-tracking” might run aground on laborious work that may need to precede any facilitation decision.
- Expedite environmental reviews of investments into the U.S. exceeding one billion dollars. This environmental review facilitation is an unusual provision in a policy document addressing national security.
- Continue to welcome and encourage passive investment from all countries. Passive investments for CFIUS purposes generally have been those in which the investor does not obtain any of: more than 10 percent voting stake or significant veto rights; a board seat, observer seat, or board nomination rights; access to company “material non-public technical information”; or other involvement in company “substantive decisionmaking.”
Stymie Foreign Adversary Access to Key Sectors of U.S. Economy
- Prevent PRC-affiliated persons from acquiring critical U.S. businesses and assets. This provision, which is echoed elsewhere in the Memorandum, seemingly restates an animating CFIUS principle for the last decade.
- Strengthen CFIUS authority to a) review “greenfield” investments, b) restrict adversaries’ access to U.S. talent and operations in AI and other sensitive technologies, and c) expand the scope of “emerging and foundational technologies” protected by CFIUS. If implemented, the ability to review greenfield investments could lead to a significant increase in CFIUS reviews of transactions and activities, such as the founding of new technology start-ups by foreign founders.
- Cease the use of “overly bureaucratic, complex, and open-ended” CFIUS mitigation agreements for investment from foreign adversaries. In practice, we believe this may lead to CFIUS approval of fewer transactions—perhaps none—where the investor has material links to China or that otherwise raise significant CFIUS concerns.
Further Restrict Certain U.S. Investments into the PRC
- Further deter U.S. persons from investing in the PRC’s military-industrial sector through: 1) a review of the current outbound investment restrictions; and 2) consideration of new and expanded restrictions on U.S. outbound investments in PRC sectors beyond the currently covered areas of semiconductors, AI, and quantum computing, to potentially reach biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy, and other sectors implicated by the PRC’s Civil-Military Fusion policy. This would potentially be a significant expansion of the outbound restrictions, resulting in increased diligence and compliance obligations for U.S. persons.
- Review and update restrictions on investments by limited partner investors (including pension funds and university endowments) into the PRC, including through private equity, venture capital, greenfield investments, corporate expansions, and investments in publicly traded securities. Presently, the outbound investment restrictions include certain exceptions and exemptions, including for investments in publicly traded securities and for certain limited partner investments. The Memorandum signals that the Trump Administration may significantly narrow or eliminate these exceptions. We also note that the Memorandum’s reference to universities signals a potential new focus area for inbound and outbound investment regulations.
The Memorandum also directs the implementation of other measures, including potential suspension or termination of the 1984 tax agreement between the United States and the PRC; review of financial auditing standards for companies subject to the Holding Foreign Companies Accountable Act; review of variable entity and subsidiary structures used by companies from foreign adversary countries; and “restoration” of the highest fiduciary standards required by the Employee Retirement Security Act of 1974.
Much of the implementation responsibility is delegated to the Secretary of the Treasury, in consultation with the Secretary of State, the Secretary of Defense, the Secretary of Commerce, the U.S. Trade Representative, the U.S. Securities and Exchange Commission, the Public Company Accounting Oversight Board, as well as heads of other executive departments and agencies. The Administrator of the Environmental Protection Agency is tasked with implementing rules to effectuate faster environmental review for inbound investments exceeding one billion dollars.
