From our SmartTrade Group at Thompson Hine!
President Trump issued the America First Investment Policy Memorandum on February 21, 2025 https://www.whitehouse.gov/presidential-actions/2025/02/america-first-investment-policy/ proclaiming that the United States “is committed to maintaining the strong, open investment environment that benefits our economy and our people, while enhancing our ability to protect the United States from new and evolving threats that can accompany foreign investment.” According to the President, “economic security is national security” and the new Memorandum attempts to strike a balance between promoting foreign direct investment from “allies and partners” while restricting inbound and outbound investment to “foreign adversaries”, defined as the Peoples Republic of China (“PRC”) including the Hong Kong Special Administrative Region and the Macau Special Administrative Region, the Republic of Cuba, the Islamic Republic of Iran, the Democratic People’s Republic of Korea, the Russian Federation, and the regime of Venezuelan politician Nicolás Maduro. The Memorandum requests a review of various Committee on Foreign Investment into the United States (“CFIUS”) procedures, limits environmental review of large scale investments into the United States, and directs various enforcement agencies such as the Securities and Exchange Commission (“SEC”) and the Federal Bureau of Investigation (“FBI”) to review, “based on the auditability, corporate oversight, and evidence of criminal or civil fraudulent behavior, all foreign adversary companies currently listed on domestic exchanges” while requiring the Secretary of Labor “to publish updated fiduciary standards under the Employee Retirement Income Security Act of 1974 for investments in public market securities of foreign adversary companies.” The President further has ordered that “[t]o protect the savings of United States investors and channel them into American growth and prosperity” his Administration will:
- “determine if adequate financial auditing standards are upheld for companies covered by the Holding Foreign Companies Accountable Act;
- review the variable interest entity and subsidiary structures used by foreign-adversary companies to trade on United States exchanges, which limit the ownership rights and protections for United States investors, as well as allegations of fraudulent behavior by these companies; and
- restore the highest fiduciary standards as required by the Employee Retirement Security Act of 1974, seeking to ensure that foreign adversary companies are ineligible for pension plan contributions.”
The tightrope between balancing foreign direct investment promotion versus maintaining national security stretches throughout the Memorandum. For example, the Memorandum orders the creation of a “fast-track” process, based on objective standards, to facilitate greater investment from specified allied and partner sources in United States businesses involved advanced technology and other important areas but security provisions will apply including that “foreign investors avoid partnering with United States foreign adversaries.” Similarly, the President desires a review of mechanisms that will potentially eliminate Environmental Protection Agency (“EPA”) and related agency environmental reviews for large scale investments (over $1 billion) and CFIUS mitigation agreements, while simultaneously expanding CFIUS review jurisdiction to new greenfield, start-up technology and farmland investments. Additionally, the Memorandum potentially reduces reporting burden on passive foreign direct investments (i.e., where the investor has “non-controlling stakes and shares 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”) but potentially places new restrictions on U.S. pension funds, endowments (particularly universities), and public traded securities on outbound investments to new sectors such as biotech, hypersonics, aerospace, advanced manufacturing, and directed energy operating in foreign adversary countries.
The Memorandum also expressly incorporates the America First Trade Policy Memorandum issued on “Day One” of the Trump Administration (see Thompson Hine Update of January 22, 2025 President Trump Announces “America First Trade Policy” | SmarTrade). As with the trade policy memorandum, the present Memorandum includes the use of the International Emergency Economic Powers Act (“IEEPA”), which the President used in announcing tariffs on China, Canada and Mexico related to border security and fentanyl (see Thompson Hine Update of February 3, 2025 President Trump Initiates Tariffs on Canada, Mexico and China Under the IEEPA – Tariffs on Mexico and Canada Suspended until March 4 but Tariffs on China Start February 4 | SmarTrade), in its more traditional sanctions role to “deter United States persons from investing in the PRC’s military-industrial sector”. This ordered review will include a review of all existing outbound investment restrictions including President Biden’s July 2023 investment restrictions on artificial intelligence (“AI”) and quantum computing. The Memorandum also orders a review as to whether to suspend or terminate the 1984 United States-The People’s Republic of China Income Tax Convention as, according to the President, “that tax treaty, along with the PRC’s admission to the World Trade Organization and the related undertaking by the United States to accord unconditional Most Favored Nation treatment to goods and services of the PRC, led to the deindustrialization of the United States and the technological modernization of the PRC military.” However, in contrast to the Day One trade memorandum which required a series of reports to be issued to the President by April 1, the present Memorandum does not have any prescribed deadline.