White House “America First Investment Policy” Directs Changes to CFIUS and Outbound Investment Programs

On February 21, 2025, President Trump issued a national security presidential memorandum (“NSPM”) outlining the America First Investment Policy.[1] The NSPM predominantly focuses on the United States’ two primary national-security regulatory programs for investors: (i) the recently implemented U.S. Outbound Investment Security Program (“OISP”)[2] and (ii) the Committee on Foreign Investment in the United States (“CFIUS”). The NSPM does not implement any specific changes to existing programs, but it does direct U.S. government agencies, including the Department of Treasury (“Treasury”), to implement the NSPM. We expect that the NSPM will have significant impacts for U.S. and non-U.S. investors.

Key Takeaways

• Economic Security Is National Security. The NSPM provides a clear policy statement that the U.S. government views economic security as a component of national security. Particularly in the CFIUS context, there has been public debate about the extent to which the committee could, or should, broadly define national security to include economic issues. This has played out most recently, for instance, in the Nippon Steel – U.S. Steel transaction. The NSPM provides a clear and forceful statement that for the Trump administration, “economic security is national security.”
• Focus Is China. The NSPM defines “foreign adversaries” to mean China (including Hong Kong and Macau), Iran, North Korea, Russia and the “regime of Venezuelan politician Nicolas Maduro.” That said, the focus of the NSPM is on China, which is discussed repeatedly throughout the document.
• Expanding the U.S. Outbound Investment Prohibition. On October 28, 2024, Treasury issued final regulations for the OISP, which prohibits U.S. persons from making investments in certain Chinese companies involved in semiconductor, artificial intelligence (“AI”) or quantum-computing development. The NSPM states that the government is considering expanding the OISP’s prohibitions to new sectors, including “biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy, and other areas.” Further, the NSPM indicates that the Trump Administration will consider applying restrictions on some categories of currently excepted transactions, notably including investments in publicly traded securities.
• CFIUS. The NSPM identifies significant changes to the CFIUS process. Most notably, the NSPM requires the creation of a “fast track” for investments from allied and partner countries. Second, the NSPM announces a departure from what it calls an “overly bureaucratic, complex, and open-ended” approach to CFIUS mitigation agreements. Third, the NSPM prescribes new measures that we expect will make the CFIUS process more restrictive on Chinese and other foreign adversary investors, including an expansion of CFIUS’s authority over greenfield investments, to further restrict access to U.S. talent and operations in sensitive technologies, especially AI,[3] and to expand the remit of “emerging and foundational” technologies addressable by CFIUS.

Further Restricting Outbound U.S. Investment to China

Perhaps the most significant directives in the NSPM relate to the recently implemented OISP. The OISP currently prohibits certain investments in a relatively narrow group of Chinese companies engaged in developing advanced semiconductor, AI and quantum technologies, while requiring notice of transactions involving companies engaged in less advanced semiconductor/microelectronic and AI activities. The NSPM indicates an expansion of the OISP is likely forthcoming:

• New industrial sectors will likely be added to the OISP. As the OISP was developed, Treasury described its program in public engagements as being designed to create a “high-fence” around a “small-yard” of technologies. The NSPM, however, calls for a larger “yard,” by identifying a number of additional technologies that are being considered for inclusion in the program. The NSPM identifies biotechnology, hypersonics, aerospace, advanced manufacturing and directed energy as industries under consideration, along with “other areas implicated by the PRC’s national Military-Civil Fusion strategy.” Particularly with the inclusion of biotechnology and aerospace, a much broader range of Chinese companies could fall under the OISP.
• More transactions may be strictly prohibited, rather than allowed with notification. Consistent with the “high-fence; small-yard” framing employed by Treasury, the OISP currently prohibits transactions involving the most-advanced semiconductor, AI, and quantum technologies, while allowing a broader group of transactions, so long as notice is provided to the U.S. government. The NSPM states that the government’s OISP review will consider “new or expanded restrictions,” indicating that, in addition to adding new categories of technologies, transactions that are currently notifiable may become prohibited.
• Fewer transaction types may be excepted. The OISP currently includes exceptions for several types of transactions, including acquisitions of publicly traded securities and certain corporate greenfield and brownfield activities. The NSPM signals that some of these exceptions may be curtailed by stating that a review is necessary to “consider applying restrictions on [different] investment types including private equity, venture capital, greenfield investments, corporate expansions, and investments in publicly traded securities, from sources including pension funds, university endowments, and other limited-partner investors.”

In addition to expanding the OISP, the NSPM directs other steps targeting Chinese companies. Treasury, in consultation with other relevant agencies, is instructed to use all necessary legal instruments, including the imposition of blocking sanctions and Chinese Military Industrial Complex sanctions (which prohibits U.S. person investment in designated companies), “to further deter United States persons from investing in the PRC’s military-industrial sector.”

The NSPM also directs Treasury to engage with the Securities and Exchange Commission and the Public Company Accounting Oversight Board to determine if adequate financial auditing standards are upheld for foreign adversary companies listed on U.S. exchanges, and to review the variable interest entity and subsidiary structures used by these companies, which limit the ownership rights and protections for U.S. investors, as well as allegations of fraudulent behavior by these companies.

Further, the NSPM directs 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, seeking to ensure that foreign adversary companies are ineligible for pension plan contributions.

Lastly, to further discourage U.S. persons from investing specifically in China, the NSPM states that the government will review suspending or terminating the 1984 United States-The People’s Republic of China Income Tax Convention (the “Tax Treaty”). The NSPM presents the Tax Treaty as a contributing factor in the deindustrialization of the United States and the technological advancement of the Chinese military. Interestingly, other factors listed by the NSPM included China’s admission to the World Trade Organization and the United States’ commitment to grant unconditional “Most Favored Nation” status to Chinese goods and services.

Modifications to the CFIUS Process

The NSPM recognizes the benefits for the U.S. economy of foreign investment from allies and partners, some of which have large sovereign wealth funds. The NPSM directs actions that we expect will bring recalibrations to the CFIUS process as it has developed following the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”).

• A true “fast-track” process. The NSPM directs the creation of a “fast-track process, based on objective standards,” for allied and partner investors in U.S. businesses involved with advanced technology and other important areas. It is unclear exactly what form this process will take. For example, the NSPM indicates the process will be tied to objective standards. This could mean the process is available only for certain investors (e.g., those investors that meet the definition of an “excepted investor” under the CFIUS regulations) or only for certain types of transactions. Indeed, it is not clear whether this fast-track process will take the form of a truly new process separate from existing mechanisms. CFIUS already has a “short-form” declaration filing option but, as discussed in our year in reviews, that process—although potentially faster than long-form notice—can often be uncertain.[4]
• Identifying the “indirect” China Risk. For some time, the Committee has considered, at least in certain cases, the connections that a non-Chinese investor has to China. The NSPM makes clear that, going forward, this will be a fundamental part of CFIUS’s risk calculus, stating that restrictions on foreign investors’ access to U.S. businesses involved in critical technology, critical infrastructure and personal data, as well as other sensitive areas, will vary depending on their “verifiable distance and independence from the predatory investment and technology-acquisition practices” of the PRC and other threat actors. We expect this to mean that, in practice, many investors may be asked to not only describe their China connections, but to demonstrate to CFIUS that they are not subject to the PRC’s military-civil fusion strategy or other influences.
• Welcoming foreign sovereign wealth-funds. As we previewed in our last CFIUS year in review,[5] CFIUS under the Trump administration could decrease scrutiny of sovereign wealth fund investments, particularly those from Middle Eastern sovereign wealth investors. The NSPM speaks approvingly of these investors, noting “[i]nvestment . . . from our allies and partners, some of whom have tremendous sovereign wealth funds, supports the national interest.” Although the NSPM does not make any specific policy prescriptions with respect to sovereign wealth fund investments, we see this statement as a sign that the Trump administration will welcome their investments.
• A simplified approach to mitigation. CFIUS’s mitigation efforts have expanded significantly since the implementation of FIRRMA. In 2023 (the last year for which annual statistics are available), CFIUS required mitigation as a condition on its approval in more than 20% of transactions. Anecdotally, mitigation agreements have also become increasingly complex; CFIUS mitigation agreements now routinely take the form of lengthy National Security Agreements rather than the shorter “letters of assurance” that CFIUS used in the past. Although CFIUS has made efforts to terminate some agreements that it believes are no longer needed, parties are generally required to enter into agreements that are indefinite in term, typically with no expectation of termination outside of a subsequent transaction that removes a mitigated company’s foreign ownership. The NSPM announces a rethinking of this approach, noting that a CFIUS mitigation agreement should “consist of concrete actions that companies can complete within a specific time, rather than perpetual and expensive compliance obligations.” As with other aspects of the NSPM, the impact of this pronouncement will depend largely on Treasury’s implementation in practice.

Conclusion

The NSPM reflects the Trump administration’s stated intention to pursue a more assertive and selective approach to foreign investment regulation, based on national security interests and economic competitiveness. The NSPM outlines a number of measures that subject to how aggressively they are implemented, could significantly affect U.S. and non-U.S. investors, companies and markets, especially those involving China and other foreign adversaries, as well as those in strategic sectors such as advanced technology and innovation. The implementation of the NSPM will depend on the actions of Treasury and other relevant agencies, as well as the cooperation of Congress where necessary and the response of foreign governments. Further, the effects of the NSPM’s implementation will also depend on President Trump and the administration itself, which we expect will continue to take a dynamic approach to navigating U.S. foreign investment policy. U.S. and foreign investors and companies should therefore closely monitor these developments and assess the potential risks and opportunities for their current and future investments in the United States.

*       *       *

[1]       America First Investment Policy Memorandum, The White House (Feb. 21, 2025), available here.

[2]       We previously addressed Treasury’s Outbound Investment Security Program. See Paul, Weiss, Treasury Department Issues Final Rule Regulating Outbound Investment to Protect National Security (Dec. 6, 2024), available here.

[3]       The White House has invited public comments on its AI Action Plan, which aims to define priority policy actions to enhance America’s AI dominance while avoiding unnecessary burdens on private sector innovation. See The White House, Public Comment Invited on Artificial Intelligence Action Plan, (Feb. 25, 2025), available here; Federal Register, Request for Information on the Development of an Artificial Intelligence (AI) Action Plan, 90 Fed. Reg. 9088 (Feb. 6, 2025) available here.

[4]       See Paul, Weiss, 2024 Year in Review: CFIUS, Outbound Investments and Export Controls (Dec. 6, 2024), available here.

[5]       Id.