- The Trump Administration recently published the "America First Investment Policy" (AFIP), a national security policy memorandum (NSPM), giving early notice of the administration’s intended approach to foreign investment in the United States.
- The NSPM emphasizes an open investment policy—it seeks to “welcome” foreign investment from allied and partner countries with a potential new “fast-track” process—while also making clear that the administration intends to restrict both inbound investment from and outbound investment to China and other “foreign adversaries” of the United States.
- Investors from allied and partner countries are expected to benefit from more efficient Committee on Foreign Investment in the United States (CFIUS) reviews with fewer and less open-ended mitigation agreements; at the same time, non-passive Chinese investments in the United States in strategic industries will continue to face a presumption of prohibition.
- The Administration also intends to expand CFIUS’ jurisdiction with respect to investments implicating emerging and foundational technologies and to close out potential exceptions for greenfield or new investments.
- The NSPM also previews the expansion of the U.S. outbound investment security program (OISP) to cover new industries (such as biotechnology, aerospace, and advanced manufacturing) and the reduction or elimination of existing exemptions for passive investments and investments in public securities, all of which would impose new compliance burdens on the U.S. investment community.
Overview
The NSPM, released on February 21, 2025, underscores the Trump Administration’s goal to bolster U.S. technological prowess and manufacturing independence through an open investment policy. The NSPM borrows from priorities identified by the Trump campaign, the House Select Committee on the Chinese Communist Party, and from then-Senator Rubio. By facilitating deregulation and encouraging investments in critical domains, the policy aims to enhance the country’s competitive edge. At the same time, the NSPM reaffirms a stringent approach toward countries deemed to be foreign adversaries, including China (and Hong Kong and Macau), Cuba, Iran, North Korea, Russia, and Venezuela under the Maduro regime.
We explore the ways in which the Trump Administration intends to balance open investment and national security considerations below.
Key Takeaways for the Investment Community
1. Fast-track CFIUS Reviews for Allies and Partner Countries
The NSPM previews a more predictable and efficient CFIUS review process for investors from allies and partners, who may qualify for “fast-track” treatment, contrasted with a presumptive prohibition on Chinese investments in strategic sectors.
There is a potential catch to the fast-track procedure in the NSPM that will be worth monitoring. CFIUS has been focused in recent years on third country risks and the potential ties to China of non-Chinese foreign investors. The NSPM makes clear that the fast-track process will include “requirements that the specified foreign investors avoid partnering with United States foreign adversaries.” (While much of the NSPM is focused on countering China, it is worth noting again that foreign adversaries also include Cuba, Iran, North Korea, Russia, and Venezuela.)
One form that the fast-track may take is through clear guidance regarding the types of investors and investments that can be cleared through the declaration process, a form of CFIUS review that is more streamlined and truncated than the notice review process. Investors have experienced mixed results from the declaration process in the past given the range of available outcomes and the lack of certainty that results if CFIUS neither clears a transaction nor invites parties to submit a notice.
While the NSPM goes to great lengths to recognize the value of foreign investment, including from sovereign wealth funds, the potential introduction of political considerations into the review of specific investment transactions could complicate the administration of the fast-track in practice.
2. Openness to Passive Investments
In contrast to the Biden Administration’s scrutiny of certain passive investments in recent years, the NSPM makes clear that passive investments from all countries will be welcome. The NSPM defines passive investments as investments in which a foreign investor has only “non-controlling stakes and shares with no voting, board, or other governance rights” and where the investments “do not confer any managerial influence, substantive decisionmaking, or non-public access to technologies or technical information, products, or services.” While this does not present a departure from the rights CFIUS traditionally views as relatively nonthreatening, the inclusion of this statement in the NSPM indicates the Trump Administration’s optimism that investment funds will continue to flow to the United States even with new directives in place.
3. Reduced Use of Mitigation Agreements
One of the more detailed areas of the NPSM concerns the Trump Administration’s view of mitigation agreements (or National Security Agreements (NSAs)) for investments from foreign adversary countries. During the Biden Administration, CFIUS made frequent use of such instruments. The NSPM states, however, that NSAs are “overly bureaucratic, complex, and open-ended” and contribute to administrative burden and government inefficiency.
The Trump Administration calls in the NSPM for such agreements to consist of “concrete actions that companies can complete within a specific time, rather than perpetual and expensive compliance obligations.” Foreign investors and U.S. target companies alike will welcome this change in approach, which may lead at the margins to increased foreign investment.
While there is a wait-and-see element to the kinds of “concrete actions” that may appear in future mitigation agreements, one potential alternative to such agreements that may be of interest to the Trump Administration is letters of assurance (LOAs). LOAs were used by CFIUS in the past, are more streamlined than NSAs, and can help balance national security risk with the broader goals of fostering an open investment climate.
4. Expansion of CFIUS Jurisdiction Over Emerging Technologies and Greenfield Investments
The NSPM includes provisions to expand CFIUS’ jurisdiction in a few ways, including with respect to greenfield investments and around redefining/expanding the scope of “emerging and foundational technologies,” potentially bringing more investments under CFIUS review.
Pursuant to the NSPM, CFIUS’ authority with respect to review of real estate investments, including for investments in real estate in densely populated urban areas, could be expanded through legislation or revised regulations (CFIUS' authority under the real estate regulations allows for closing potential gaps in consultation with the Secretary of Defense). In addition, the NSPM highlights the importance of restricting foreign adversaries from acquiring farmland and real estate near U.S. military installations. It will be important to monitor how these efforts will interact with related state and local efforts.
Pursuant to the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), CFIUS gained the authority to review non-controlling investments in “emerging and foundational technologies” as a subset of “critical technologies.” As a result of the NSPM, technologies that were previously subjected to limited export controls restrictions might now face stringent CFIUS scrutiny in the context of an investment, particularly in fields like biotechnology and artificial intelligence, if they are deemed to be emerging or foundational. It will be important to monitor how the Commerce Department and other stakeholders approach this topic as it could result in a broader range of transactions being subject to mandatory CFIUS filing obligations.
5. Stricter Stance on Chinese Investments and for Investors with Exposure to China
Chinese investments, already facing significant barriers, will confront even more restrictions. The NSPM highlights that the Administration will use all necessary legal instruments to restrict Chinese investments in “United States technology, critical infrastructure, healthcare, agriculture, energy, raw materials, or other strategic sectors.” While CFIUS has never outright prohibited investments by certain countries in particular sectors (and CFIUS likely does not have the jurisdiction to do this), the Administration hints at this development and also proposes expansions in CFIUS authority to target Chinese greenfield investments with respect to real estate, including in urban areas, potentially curtailing the organic growth of Chinese companies within the United States.
Even for non-Chinese investors with limited investments in China, the risk of third-country exposure stemming from such investments will pose complications under these new directives. U.S. allies and partners should evaluate whether their investments in China or involving Chinese partners may be viewed as threatening U.S. national security.
6. Expansion of Scope of OISP
The NSPM also hints at a broader and more complex landscape for U.S. outbound investments in China. The OISP currently prohibits or requires notification of investments by U.S. investors in China-affiliated companies operating in certain areas of the artificial intelligence, semiconductor, and quantum computing sectors. While in effect only since January 2, 2025, the sectors covered by the OISP are expected to be broadened to encompass areas of economic activity including biotechnology, hypersonics, aerospace, advanced manufacturing, and directed energy. The NSPM directs the Office of Science and Technology Policy to review and update the covered sectors.
Further, while the OISP currently includes various exceptions, including for investments made in certain publicly traded securities and investments made as a limited partner in certain pooled investment funds, the NSPM signals that these exceptions may be tightened or eliminated. This could result in additional compliance burdens for the U.S. investment community. This could result in additional compliance burdens for the U.S. investment community.
In addition, the NSPM makes clear that the Trump Administration will use all legal authorities to continue to deter U.S. investment in the Chinese military-industrial sector. It remains possible that the International Emergency Economic Powers Act (IEEPA), for example, will be used to promulgate new sanctions in this regard.
Conclusion
The AFIP reveals the Trump Administration’s intended approach to international investments aimed at strengthening the U.S. economy and protecting national security. While offering new opportunities for allied/partner country investments, it emphasizes the need for continued scrutiny of Chinese investments in the United States and for the expansion of restrictions on U.S. investments in China. Investors will need to stay abreast of these evolving regulations to effectively navigate the changing landscape and align their strategies accordingly.
In particular, the NSPM highlights that dealmakers should develop a sophisticated CFIUS strategy for every stage of the transaction process. Parties contemplating transactions involving foreign investments in U.S. businesses should evaluate CFIUS considerations early in the transaction process and ensure they are prepared to address CFIUS concerns and to comply with mitigation measures that may be imposed.
Dechert represents a wide range of clients through CFIUS reviews and OISP analyses, including major operators and investors in the high tech, telecommunications, energy, defense, healthcare, and infrastructure industries. We regularly advise foreign and domestic entities (“buyers” and “sellers,” as well as other interested third parties) through the CFIUS review process, helping them determine whether or not to bring a transaction before CFIUS (and whether or not CFIUS review is required), to assemble the required information and materials for a filing, to negotiate (as necessary) national security agreements with CFIUS in a manner that minimizes both delay and the imposition of conditions that might threaten the transaction, and to design and implement a compliance plan that allows parties to meet any imposed CFIUS mitigation obligations. We also assist U.S. and non-U.S. investors, funds, investment managers, and others in the financial services industry with navigating potential OISP issues and mitigating risk. In support of all our advice, we give counsel on strategies for identifying and addressing political and policy considerations that may arise.
