On February 21, 2025, President Trump published a National Security Presidential Memorandum outlining his administration’s views on foreign investment and substantial changes to current regulatory regimes. The memorandum—which is similar in effect to an executive order—outlined two administration priorities: (i) promoting foreign investment in the United States and (ii) protecting America’s national security interests from threats posed by foreign adversaries, defined to include the People’s Republic of China (“PRC” or “China”) and the Russian Federation. It plans to achieve these objectives through taking the following measures:
The memorandum announces policies that are consistent with prior administrations’ policies—attracting foreign investment while mitigating the risks posed by adverse capital—but in ways that portend major changes to fundamental principles of how CFIUS operates.
First, the memorandum delineates between the treatment of investments from “allies and partners” and those from “the PRC and other foreign adversaries or threat actors.” Those familiar with CFIUS’s risk assessments understand investments from foreign adversaries are treated with much greater scrutiny, but the regulatory framework has steadfastly steered clear of differentiating based on the nationality of the investors (i.e., creating whitelists or blacklists of investors).
To the extent the policy is implemented in regulation, questions loom regarding CFIUS’s shift to a country-based approach (similar to export controls) and how will it deal with the complexities of assigning nationality to entities with a myriad shareholders with multiple principal places of business. We also expect countries to proactively engage with the United States government to assure themselves preferential treatment, potentially complicating the assessment.
Second, the memorandum previews an expansion of the government’s authority to review foreign investment to cover not only technology and critical infrastructure, but also farmland and “greenfield” investments for investments from adversary countries. Greenfield investments—i.e., the creation of a U.S. business by a foreign person—have long been outside the scope of CFIUS’s jurisdiction, but they have been a source of concern from political, congressional, and administrative leadership. The memorandum notes that such changes will require “consultation with Congress.”
Congressional efforts to bring greenfield investments within the ambit of CFIUS jurisdiction have been unsuccessful previously, though there may be renewed appetite for such changes with Trump administration support.
Third, the memorandum announces that the “United States will create an expedited ‘fast-track’ process to facilitate greater investment from specified allied and partner sources in United States businesses involved with United States advanced technology and other important areas.” This previews another departure from CFIUS’s current structure: that all covered transactions are reviewed under the same assessment or review rubric regardless of nationality.
Major investors from close allies and partners have pushed for expedited or favorable treatment; to a certain extent, a version of this was implemented during Trump’s first term through the CFIUS declaration process. But there is an appetite to take this further, as the “fast-track” process anticipates investments in “advanced technology and other important areas.” This may be a recognition—consistent with the president’s early public engagement with investors and technology leaders—that major foreign investment is critical in key areas like artificial intelligence infrastructure and quantum computing.
Finally, the memorandum announces a shift away from “overly bureaucratic, complex and open-ended ‘mitigation’ agreements for United States investments from foreign adversary countries.” It states that “mitigation agreements should consist of concrete actions that companies can complete within a specific time, rather than perpetual and expensive compliance obligations.”
Recent administrations, including the first Trump administration, increased the use of mitigation agreements to clear transactions that presented national security concerns. Over the years, these agreements grew in complexity and were assumed to apply in perpetuity, and they were an important part of the Biden administration’s emphasis on compliance and verifiability. These agreements, however, created compliance risks for the transaction parties, but also challenges to the U.S. businesses’ ability to grow and operate in the global markets. They also required substantial resources from the parties and from the government to ensure compliance.
It is not clear if this announcement will mean that most investments from allies and partners will proceed free of mitigation (as most do now), or if CFIUS will be less willing to mitigate sensitive transactions from adversary countries and instead opt for more measurable and time-limited mitigation (e.g., the investor agreeing to divest from or wind down operations in adversary countries).
The Trump administration also indicated that it will “use all necessary legal instruments to further deter United States persons from investing in the [People’s Republic of China’s] military-industrial sector.” It highlighted two primary tools: sanctions and the newly enacted Outbound Investment Security Program, which prohibits and requires filings for certain U.S. person investments in China and China-connected entities.
These instruments including building on and considering new restrictions in the semiconductors, artificial intelligence, quantum, biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy, and other areas implicated by China’s national Military-Civil Fusion strategy. Currently, the outbound investment screening program prohibits or requires notifications for U.S. person transactions with China-connected entities that engage with semiconductors and microelectronics, quantum information technologies, and artificial intelligence (AI) systems.
If new industrial sectors are added to the existing regulations, the obligations associated with such expansion will expand in kind, and U.S. person investors should track their obligations vis-à-vis investments in China closely.
In addition to expanding the scope and adding to restrictions covered under the existing outbound investment regulations, the memorandum indicates the Trump administration may deter investments in the PRC military-industrial sector by imposing sanctions through blocking of assets or other actions. This would be a significant escalation in approach. To this point, the United States has not used sanctions as a primary tool to prohibit investment in China, presumably because of broad potential unintended consequences. This may change as the Trump administration looks to use all available legal tools.
Although in many ways restating existing realities for investors, the memorandum’s directives herald some substantial changes to the investment landscape to come. There will be greater delineation between investments from nations allied with the United States and those from foreign adversaries, and there will be even greater scrutiny for investments from U.S. persons. Some aspects of the memorandum will require updates to existing laws and regulations, but others will have immediate effect, given the discretion afforded the executive branch under the applicable regulatory regimes.