Last Friday the White House issued two memoranda addressing the investment landscape for foreign companies operating in the United States and U.S. companies operating abroad.
The new directives outline new restrictions on inbound investment from foreign adversaries while promoting investment from key allies, as well as measures to counteract taxes and regulations on American businesses overseas. As discussed below, both policies carry significant implications for companies engaged in cross-border investment with the United States.
America First Investment Policy
The primary objective of the “America First Investment Policy” memorandum is to limit investment from “certain foreign adversaries” specifically including China. To this end it establishes new restrictions on foreign investors’ access to critical technology, critical infrastructure, personal data, and other sensitive areas.
Restrictions on investment will “ease in proportion to their verifiable distance and independence from the predatory investment and technology-acquisition practices of China and other foreign adversaries or threat actors.” Notably, the memorandum does the following:
- Instructs executive agencies to create a “fast-track” process to facilitate greater investment from specified allied and partner sources in U.S. businesses involved with U.S. advanced technology and other important areas;
- Redirects resources previously allocated to mitigation agreements from foreign adversaries towards facilitating investments from key partner countries;
- Directs the Committee on Foreign Investment in the United States (CFIUS) to restrict Chinese-affiliated entities from investing in the United States; and
- Strengthens CFIUS’s authority over “greenfield” investments to restrict foreign adversary access to U.S. talent and assets in sensitive technologies and “expand the remit of ‘emerging and foundational’ technologies addressable by CFIUS.”
Alongside restrictions on inbound investment, the memorandum builds on restrictions on outbound investment in China taken under the first Trump Administration:
- Instructs executive agencies to consider new or expanded restrictions on outbound investments to China in sensitive technologies, including semiconductors, artificial intelligence, quantum computing, biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy, and other areas implicated by the China’s national Military-Civil Fusion strategy; and
- Declares an intention to review whether to suspend or terminate the 1984 United States-The People’s Republic of China Income Tax Convention to further reduce incentives for U.S. persons to invest in foreign adversaries (defined as China, Hong Kong, Macau, Cuba, Iran, North Korea, Russia, and the Maduro regime in Venezuela).
Defending American Companies and Innovators from Overseas Extortion and Unfair Fines and Penalties
In conjunction with the “America First Investment Policy,” another memorandum — titled “Defending American Companies and Innovators from Overseas Extortion and Unfair Fines and Penalties” — aims to safeguard the United States’ growing digital economy from what it describes as overseas extortion. The memorandum highlights concern that foreign governments, including key trading partners, have violated U.S. sovereignty, offshored jobs, diminished global competitiveness and increased operational costs for U.S. companies, and risked exposing sensitive information to foreign regulators in the form of digital services taxes (DST), restrictive regulations, limitations on cross-border data flow, and requirements for U.S. streaming services to fund local productions, etc.
The Trump Administration has reaffirmed its commitment to counteracting these foreign measures through the Reciprocal Tariff Policy, aiming to respond to any tax or regulatory structures, fines, penalties, or other practices that transfer significant funds or intellectual property from American companies to foreign entities through tariffs. Therefore, the Administration is directing relevant agencies to take the following actions:
- Renew and expand to additional countries the Section 301 DST investigations of France, Austria, Italy, Spain, Turkey, and the United Kingdom that were initiated during the first Trump Administration;
- Evaluate whether to pursue a panel under the United States-Mexico-Canada Agreement (USMCA) on Canada’s DST;
- Review whether any act, policy, or practice in the European Union (such as the Digital Markets Act and the Digital Services Act) or the UK incentivizes U.S. companies to develop products or technologies in a manner that undermines free speech or fosters censorship;
- Assess whether any foreign country subjects U.S. citizens or companies operating in the digital economy to discriminatory or extraterritorial taxes;
- As part of the report required in section 5(c) of the America First Trade Policy Memorandum, identify tools the United States can use to secure among trading partners a permanent moratorium on customs duties on electronic transmissions; and
- Establish a mechanism for American businesses to report foreign tax or regulatory practices that disproportionately harm U.S. companies.
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Cassidy Levy Kent has experience assisting clients navigating changes to foreign investment policy. We expect further developments in this space and will continue to provide updates. In the meantime, please contact us with any questions.