Executive Summary

On Feb. 21, President Donald Trump issued a presidential memorandum titled “America First Investment Policy” outlining proposed sweeping changes to U.S. foreign investment review processes. This memorandum is likely to lead to a shift in how the Committee on Foreign Investment in the United States (CFIUS) operates and portends expansion of both inbound and outbound investment controls. While the memorandum itself does not create immediate legal obligations, it directs federal agencies to implement significant regulatory changes in the coming months.

Key highlights include proposals for:

• A “fast-track” review process for investments from allied nations.
• Expanded CFIUS authority over greenfield investments.
• Stronger restrictions on investments from foreign adversaries.
• Streamlined mitigation agreements with concrete timelines.
• Broadened definition of critical sectors to include farmland, food security, and natural resources.
• Expanded outbound investment controls targeting China’s military-industrial complex.

Two-Track Investment Review System

Allied Investment: Streamlined Process

The policy envisions a fast-track for investments from allied nations with expedited reviews based on their “verifiable distance” from adversary nations and accelerated environmental reviews for investments exceeding $1 billion, streamlining the process for friendly countries while maintaining security protocols.

The ultimate scope of this expedited process remains to be seen. The memorandum requires showing “verifiable distance” from adversary nations but doesn’t explain what this means in practice. A foreign sovereign wealth or private equity fund with investments in Chinese companies, for example, may face challenges proving that it is sufficiently independent from China to qualify for fast-track treatment. Additionally, some environmental and real estate reviews are pursuant to state or local laws, which might not be accelerated.

Foreign Adversary Investment: Enhanced Scrutiny

Designated “foreign adversaries” include China (with Hong Kong/Macau), Cuba, Iran, North Korea, Russia, and Venezuela’s Maduro regime. Investment funds with mixed nationality ownership should consider segregating capital sources. Even small ownership percentages from adversary nations might potentially disqualify transactions from expedited treatment.

Expanded CFIUS Authority and Investment Controls

Broader Sectoral Coverage and Review Powers

CFIUS is expected to significantly restrict adversary investments across an expanded range of strategic sectors including technology and AI, critical infrastructure, health care, agriculture and food supply, energy and raw materials, farmland near sensitive facilities, and ports and shipping terminals. Agricultural processors and companies holding significant farmland now face potential mandatory CFIUS filings. CFIUS risk assessments is recommended for any business in these newly covered sectors that anticipates taking foreign investment.

The policy also envisions authority over greenfield investments (new business establishments rather than acquisitions), foreign access to U.S. talent in sensitive technologies, and knowledge transfer pathways. Tech companies, especially in AI, may face increased scrutiny over international research partnerships and joint development arrangements.

Additionally, the policy disfavors complex mitigation agreements (CFIUS “National Security Agreements”) and proposed a focus on concrete actions with specific timeframes, potentially resulting in more binary approval/denial decisions rather than ongoing compliance obligations. Companies with existing mitigation agreements should consider whether the new framework might create an opportunity to reduce compliance costs.

Strategic Opportunities: Passive Investment

Despite the restrictive approach toward adversary nations, the memorandum explicitly welcomes passive investments from all countries when properly structured. These must be non-controlling stakes without voting or governance rights and no access to non-public information, consistent with CFIUS’ existing investment fund exception. Investment term sheets should be carefully reviewed regarding information rights, board observer provisions, and approval rights that might compromise passive status.

Expanded Outbound Investment Controls

Broadened Scope and Coverage

The policy proposes significant expansion of outbound investment controls, such as adding biotechnology, hypersonics, aerospace, advanced manufacturing, and directed energy to the list of regulated sectors. Pharmaceutical companies and medical device manufacturers with Chinese operations may need to reconsider their manufacturing strategies in light of these changes. Controls would also extend to more transaction types, including private equity, venture capital, corporate expansions, publicly traded securities, and investments from institutional sources like pension funds and university endowments. Institutional investors will likely need enhanced due diligence processes for investments with China exposure.

The memorandum proposes consideration of several additional financial measures, including suspending the 1984 U.S.-China Tax Treaty, imposing sanctions against China’s military sectors, stricter enforcement of accounting standards for foreign companies, and reviewing variable interest entity (VIE) structures commonly used by Chinese companies on U.S. exchanges. Companies utilizing the tax treaty should develop contingency plans for a post-treaty environment.

Implementation Outlook and Strategic Considerations

Most changes will require agency rulemaking to implement, with no specific timeline provided in the memorandum. Expanding CFIUS jurisdiction over greenfield investments would likely require congressional action, rather than just executive branch implementation. It is anticipated that CFIUS will initiate a formal rulemaking process to implement objectives within its jurisdiction, although the memorandum provides no specified timeline for such regulatory action.

Affected parties are advised to monitor notices, announcements, and other official communications for indications of forthcoming regulatory proposals. Companies should assess CFIUS risk in newly emphasized sectors, review investment structures to optimize regulatory treatment, establish stronger technology controls, and evaluate Chinese operations against expanded outbound investment categories. Early preparation will create competitive advantages as these regulations take shape.
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For more information on the America First Investment Policy memorandum and its potential impact on business operations, investment strategies, or pending transactions, please contact a member of Taft’s CFIUS practice group.