Trump Administration Signals Material Updates to CFIUS and Outbound Investment Regulations
Client Alert | February 26, 2025
On February 21, 2025, the White House issued the “America First Investment Policy” National Security Presidential Memorandum, signaling an intention to increase restrictions and modify review criteria for U.S. inbound investments with Chinese touchpoints and expand the scope of the nascent outbound investment restrictions.
On February 21, 2025, the White House issued a National Security Presidential Memorandum titled the “America First Investment Policy” (the “America First Investment memo”) and accompanying fact sheet (Fact Sheet) proposing material changes to the U.S. foreign direct investment and outbound investment regulatory landscape, including to regulations for the Committee on Foreign Investment in the United States (CFIUS) and the Outbound Investment Security Program. It also directs CFIUS to promulgate new rules and regulations to implement some of these changes.
The America First Investment memo both underscores some continuing trends and foreshadows more significant changes to come in the months ahead. Of note, there will be no immediate change to CFIUS or the Outbound Investment Security Program because the memo requires further implementing rules and other agency action and potentially, in some cases, further action by Congress. That said, investors and companies should start considering the memo’s directives now, while continuing to monitor new developments from the Trump Administration, as they plan for transactions that will close later in 2025 and in 2026.
Continuing Trends:
The America First Investment memo elaborates on a few continuing trends:
1. The United States will remain open to investment, particularly passive
investment.
The memo reiterates the United States’ long-held policy of being “open” to foreign investment, noting that “[o]ur Nation is committed to maintaining the strong, open investment environment that benefits our economy and our people.” Specifically, the memo states that “passive investments from all foreign persons”—which “include non-controlling stakes and shares with no voting, board, or other governance rights and that do not confer any managerial influence, substantive decisionmaking, or non-public access to technologies or technical information, products, or services”—will continue to be welcomed and encouraged.
2. The United States will continue to disfavor non-passive investment—
both inbound and outbound—implicating China and other “foreign
adversaries.”
The memo specifies that “foreign adversaries” include the People’s Republic of China, including Hong Kong and Macau (China), as well as Cuba, Iran, North Korea, Venezuela, and—notably—Russia. For nearly a decade, the United States has presented an increasingly harsh investment environment for non-passive Chinese investors. The memo reiterates a continuation of this trend. Moreover, CFIUS continues to exercise greater scrutiny of non-Chinese investors’ ties to China, including through their minority investors, joint ventures, supply chain risk, and even arms-length commercial agreements. One example of relationships that continue gaining ever greater scrutiny is cooperation on technology development.
3. The United States will maintain restrictions on outbound investments to
China and look to expand these restrictions to additional industries.
As we discussed in a recent client alert, the newly enacted Outbound Investment Security Program that places conditions on certain U.S. person investments in the Chinese semiconductors, artificial intelligence, and quantum technology sectors is here to stay, and may be expanded further this year. The America First Investment memo directs that covered sectors be “reviewed and updated regularly” and enumerates a few sectors that may be added to the list of prohibited sectors, including biotechnology, hypersonics, aerospace, advanced manufacturing, and directed energy.
Changes to Come:
1. While lacking in detail, the memo directs CFIUS to develop rules
for an expedited “fast-track” process for foreign investment from
allied and partner countries.
The America First Investment memo directs the U.S. government to create an “expedited ‘fast-track’ process, based on ‘objective standards,’ to facilitate greater investment from specified allied and partner sources in United States businesses involved with United States advanced technology and other important areas.”[1] The memo states that the investments may include certain security provisions and assurances that the investors will not partner with U.S. foreign adversaries “in corresponding areas.” The memo raises critical, threshold questions, which we expect will be answered in the implementing laws and regulations and associated guidance:
- How will this work? The memo provides no detail on what the fast-track process will look like or what the timing for reviews will be, nor what the attendant security provisions may look like. Important terms, such as “objective standards” remain undefined.
- What will count as partnering with foreign adversaries? The memo does not provide any information on what constitutes “partnering.” While we would expect investments to be covered, it remains unclear whether investors will receive unfavorable treatment based on having Chinese vendors, customers, or entities and facilities located in China. Similarly, the memo does not explain to what extent partners and allies must distance themselves from China to gain favorable investment treatment. While the Fact Sheet indicates that any restrictions on partnering will be limited to “corresponding areas” (i.e., “advanced technology and other important areas”), the memo itself does not include any such qualification and suggests a rather broad restriction on engagement with Chinese counterparties.
- To whom will this apply? Although the memo does not provide a list of approved allies and partners, it explains that some have “tremendous sovereign wealth funds.” This suggests a possible deviation from long-held practice for CFIUS to more strictly scrutinize government-controlled investors, including those from the Middle East.
2. The memo calls for expanded authorities for CFIUS to more strictly
scrutinize greenfield investments.
In past years, CFIUS’s primary tool to review and restrict greenfield investment in the United States, particularly by investors affiliated with China, was through its real estate regulations. We discussed expansions to real estate reviews in a recent client alert. Some of the real estate-related risks that the memo highlights include China’s investments in U.S. “food supplies, farmland, minerals, natural resources, ports, and shipping terminals,” with particular attention on “farmland and real estate near sensitive facilities.” In addition to restrictions on investment in real estate, President Trump appears poised to continue the previous administration’s efforts to further restrict greenfield investments by seeking additional authority for CFIUS to review these projects. This will require, as the memo notes, “consultation with Congress” and updated laws to expand CFIUS’s already expansive jurisdiction.
3. The memo portends sweeping changes to how CFIUS uses national
security mitigation agreements.
The memo states that the Trump Administration will “cease the use of overly bureaucratic, complex, and open-ended ‘mitigation’ agreements for United States investments from foreign adversary countries.” This suggests that more transactions from adversary countries could be blocked outright, rather than being approved subject to mitigation. Allied and partner nations may also feel pressure to reduce future investments in U.S. foreign adversaries in order to receive more favorable mitigation agreement conditions, or to avoid mitigation altogether. More generally, the memo states that “mitigation agreements should consist of concrete actions that companies can complete within a specific time, rather than perpetual and expensive compliance obligations.” The memo raises many questions about how this will work in practice because, owing to the nature of developing technology and evolving threats to national security, compliance efforts for areas related to personal data, cybersecurity, and sensitive and export-controlled technology are ongoing efforts—not one and done fixes.
4. The memo directs greater scrutiny be applied to investment in Chinese
companies.
The memo calls attention to Chinese companies raising capital by selling interests to American investors through foreign public exchanges and U.S. exchanges, which the memo warns “exploits United States investors to finance and advance the development and modernization of [China’s] military.” The memo directs the review of a few laws and regulations governing investments into Chinese companies, including the 1984 U.S./China tax treaty, financial auditing standards and rules for U.S. exchanges, and restrictions on U.S. pension plan investments through foreign exchanges. Notably, review of the outbound investment restrictions will also include the potential application of restrictions to investments by U.S. pension funds, university endowments, and other limited-partner investors in publicly traded securities of Chinese companies engaged in certain sensitive sectors. Such restrictions would mark a significant intensification of the Outbound Investment Security Program that currently specifically excludes investments in publicly traded securities from its ambit, though investments by U.S. persons in certain publicly traded securities of Chinese military-industrial complex companies are separately restricted by the U.S. Department of the Treasury.
As the Trump Administration attempts to leave its mark on U.S. inbound and outbound investments, we expect additional action in the coming months to implement provisions of the America First Investment memo. Companies should remain abreast of changing regulations and enforcement priorities moving forward.
[1] The memo also highlights expedited environmental reviews for investments over $1 billion but does not provide any details of the conditions or process for these reviews, nor the timing for when they will be implemented.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s International Trade Advisory & Enforcement practice group:
United States:
Ronald Kirk – Co-Chair, Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Donald Harrison – Washington, D.C. (+1 202.955.8560, dharrison@gibsondunn.com)
Christopher T. Timura – Washington, D.C. (+1 202.887.3690, ctimura@gibsondunn.com)
David P. Burns – Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
Courtney M. Brown – Washington, D.C. (+1 202.955.8685, cmbrown@gibsondunn.com)
Amanda H. Neely – Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)
Samantha Sewall – Washington, D.C. (+1 202.887.3509, ssewall@gibsondunn.com)
Michelle A. Weinbaum – Washington, D.C. (+1 202.955.8274, mweinbaum@gibsondunn.com)
Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)
Mason Gauch – Houston (+1 346.718.6723, mgauch@gibsondunn.com)
Chris R. Mullen – Washington, D.C. (+1 202.955.8250, cmullen@gibsondunn.com)
Sarah L. Pongrace – New York (+1 212.351.3972, spongrace@gibsondunn.com)
Anna Searcey – Washington, D.C. (+1 202.887.3655, asearcey@gibsondunn.com)
Audi K. Syarief – Washington, D.C. (+1 202.955.8266, asyarief@gibsondunn.com)
Scott R. Toussaint – Washington, D.C. (+1 202.887.3588, stoussaint@gibsondunn.com)
Lindsay Bernsen Wardlaw – Washington, D.C. (+1 202.777.9475, lwardlaw@gibsondunn.com)
Shuo (Josh) Zhang – Washington, D.C. (+1 202.955.8270, szhang@gibsondunn.com)
Asia:
Kelly Austin – Denver/Hong Kong (+1 303.298.5980, kaustin@gibsondunn.com)
David A. Wolber – Hong Kong (+852 2214 3764, dwolber@gibsondunn.com)
Fang Xue – Beijing (+86 10 6502 8687, fxue@gibsondunn.com)
Qi Yue – Beijing (+86 10 6502 8534, qyue@gibsondunn.com)
Dharak Bhavsar – Hong Kong (+852 2214 3755, dbhavsar@gibsondunn.com)
Arnold Pun – Hong Kong (+852 2214 3838, apun@gibsondunn.com)
Europe:
Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com)
Patrick Doris – London (+44 207 071 4276, pdoris@gibsondunn.com)
Michelle M. Kirschner – London (+44 20 7071 4212, mkirschner@gibsondunn.com)
Penny Madden KC – London (+44 20 7071 4226, pmadden@gibsondunn.com)
Irene Polieri – London (+44 20 7071 4199, ipolieri@gibsondunn.com)
Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com)
Nikita Malevanny – Munich (+49 89 189 33 224, nmalevanny@gibsondunn.com)
Melina Kronester – Munich (+49 89 189 33 225, mkronester@gibsondunn.com)
Vanessa Ludwig – Frankfurt (+49 69 247 411 531, vludwig@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.