President Trump announces “America First Investment Policy”

Policy and implementation

The NSPM outlines several measures to facilitate and encourage foreign investment in the United States that supports economic growth, job creation, and innovation, including:

• A "fast-track" process to facilitate greater investment from specified allies and partners, subject to appropriate security provisions, including requirements that investors avoid partnering with U.S. “foreign adversaries” (which are defined in the NSPM as the People’s Republic of China (PRC), including Hong Kong and Macau, Cuba, Iran, North Korea, Russia, and the regime of Venezuelan politician Nicolás Maduro). The NSPM also notes that restrictions on foreign investors’ access to U.S. assets will ease in proportion to their verifiable distance and independence from the practices of the PRC and other foreign adversaries or threat actors;
• Expedited environmental reviews for any investment over USD1 billion; and
• Encouraging passive investments from all foreign persons (i.e., non-controlling stakes with no voting, board, or other governance rights and that do not confer any managerial influence, substantive decision-making, or non-public access to technologies or technical information, products, or services).

At the same time, the NSPM states that the United States “will use all necessary legal instruments, including the Committee on Foreign Investment in the United States (CFIUS), to restrict PRC-affiliated persons from investing in United States technology, critical infrastructure, healthcare, agriculture, energy, raw materials, or other strategic sectors.” In addition, the Trump administration intends to take steps to protect U.S. farmland and real estate near sensitive facilities, strengthen CFIUS authority over so-called "greenfield" investments, which involve the establishment of new facilities or operations, restrict foreign adversary access to U.S. talent and operations in sensitive technologies (especially artificial intelligence), and expand the scope of “emerging and foundational” technologies covered by CFIUS’s regulations. The NSPM also directs CFIUS to cease the use of open-ended “mitigation agreements” to address national security concerns related to investments from foreign adversaries. Instead, the NSPM notes that mitigation agreements should consist of concrete actions that companies can complete within a specific timeframe, and that more resources will be directed toward facilitating investments from key partner countries.

Further, the NSPM states that the United States will:

• Establish new rules to stop U.S. companies and investors from investing in industries that advance the PRC’s Military-Civil Fusion strategy and stop PRC-affiliated persons from purchasing certain American businesses and assets;
• Use all necessary legal instruments, including the imposition of sanctions, to further deter U.S. persons from investing in the PRC’s military-industrial sector;
• Consider new or expanded restrictions on U.S. outbound investment in the PRC in sectors such as semiconductors, artificial intelligence, quantum, biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy, and other areas implicated by the PRC’s national Military-Civil Fusion strategy;
• Review whether to suspend or terminate the 1984 U.S.-PRC Income Tax Convention; and
• Consider steps to ensure that adequate financial auditing standards, corporate oversight, and fiduciary standards are upheld for foreign adversary companies that trade on U.S. exchanges or receive U.S. pension fund contributions.

The NSPM directs the Secretary of the Treasury, in consultation with other relevant agencies and executive branch officials, to take actions to implement the policy, including the promulgation of rules and regulations. The NSPM also directs the Administrator of the Environmental Protection Agency, the Attorney General, and the Secretary of Labor to take specific actions to support the policy.

Key takeaways

The NSPM does not change any laws, but will likely have significant implications for investors, businesses, and markets, particularly with respect to the CFIUS process and the relationship between the United States and the PRC. On the one hand, the NSPM declares that the United States will welcome foreign direct investment and ease certain U.S. regulatory processes to entice large investors that are willing to commit to the United States. On the other hand, the NSPM makes clear that the U.S. government prefers foreign investors with few entanglements with countries that the United States considers to be adversaries. Notably, the NSPM indicates that CFIUS may take a different approach when reviewing transactions and assessing national security risks under the Trump administration than it has taken in the past, considering foreign investors’ ties to and relationships with U.S. adversaries. Companies should closely monitor NSPM implementation to assess both risks and opportunities for current and planned activities. In particular, foreign investors contemplating opportunities in the United States should conduct a geopolitical risk self-assessment to evaluate consistency with the America First Investment Policy.

For more information, please contact the authors or another member of the A&O Shearman team.