As the Trump administration pushes forward with tariffs to limit imports, they are not reserving their reviews merely to the movement of goods. The administration is also pushing forward with policies which will limit foreign investment in the United States through proposed adjustments to the long-standing investment screening regime, the Committee on Foreign Investment in the United States (CFIUS).

CFIUS reviews strengthen US efforts to maintain national security by ensuring governmental review and national control of essential industries. Established to limit foreign control of US critical infrastructure and emerging technologies, CFIUS has grown to encompass major parts of the US economy.

CFIUS allows the US government to review investments into a wide range of sectors by foreign actors, state-owned companies, or private businesses with majority foreign ownership. These include traditional infrastructure and raw material production such as electricity and steel, as well as sectors essential to the modern economy such as semiconductors and artificial intelligence (AI).

In an attempt to further strengthen US government oversight and limit Chinese investment in US critical infrastructure, the Trump administration has issued the National Security Presidential Memorandum (NSPM). The NSPM relies heavily on updating and expanding CFIUS to include more sectors, strengthen CFIUS reviews, limit mitigation measures, and reshape exemptions.

However, the NSPM does nothing to fix the underlying issues which plague CFIUS and place limitations on cross-border investments into the United States from allies. 

The largest complications surrounding CFIUS center on review of investments from fellow Western democracies and clearance process timelines. The NSPM offers the solution of a white list to expedite and clear investment from like-minded countries more easily, but the list poses more questions than solutions.

CFIUS currently includes specific exemptions, including surrounding investments by those with citizenship from trusted national security allies. The proposed white list would include additional trusted countries with appropriate approaches to China. This would be paired with a “fast-track” process for investments which fit these requirements.

However, in practice, existing exemptions have done little to provide certainty or clearance for investors. Nippon Steel’s proposed investment in US Steel illustrates the difficulty for investments which should be clear cut. This investment is from a critical security partner and longtime Asian ally, yet it continues to face numerous hurdles.  Despite offering a clear alternative to Chinese investment in a critical industry and providing numerous investment opportunities between longtime security partners, political support for the deal is limited. The CFIUS process may have cleared the investment based on the facts, but President Biden blocked completion of the deal through an executive order and President Trump’s support of the deal remains fickle at best.

CFIUS as it stands offers comprehensive definitions for the sectors it covers. This is problematic for technology investments, when daily advancements are made in both hardware and software. From the development and incorporation of AI into daily life to the exploration of quantum computing solutions, CFIUS oversight touches nearly every part of the digital economy.

Instead of working to define these terms and provide clarity, the NSPM looks to expand CFIUS coverage into even more sectors. The proposed expansion for CFIUS oversight would include greenfields, agriculture, and other sectors outside of technology and infrastructure.

Once again, how these sectors and investments will be defined remains unknown. If the current CFIUS regime is anything to go by, these definitions will be expansive and vague. Investors will face increased uncertainty as they work to assess if any of their potential investments are captured by CFIUS screening.

Though mandatory for certain industries and sectors, of which the NSPM proposes wide expansions, most investments fall under the voluntary CFIUS regime.

The voluntary filing process allows a firm to notify CFIUS of their proposed investment and gain approval prior to completion. Businesses can decide to voluntarily file through the regime, inviting CFIUS to review the potential investment and provide their approval. By drawing attention to the potential deal, firms open the investment to the in-depth scrutiny of a CFIUS review. Though time consuming and costly, approval through this system can provide certainty for the investment alongside symbolizing a firm’s commitment to US regulatory oversight.

If a firm decides against making voluntary filing, this does not guarantee a lack of CFIUS oversight. Though the filings are truly voluntary, CFIUS’s increased reach and powers can present a looming threat to investments.

CFIUS has the authority to review any investment, regardless of status. Any potential risk to national security as determined by CFIUS is worthy of review. This includes long-established investment arrangements which are past the point of completion. As industries transform and national security priorities shift, there is every chance that a previously completed deal could come under CFIUS review. When this happens, businesses face the complications of a CFIUS review, as well as the very real possibility of having to unwind their investments long after a deal is done.

This threat is more pronounced than ever as retroactive CFIUS reviews are triggered and approved by executive branch officials. With an administration that is taking an increasingly critical eye and politicized stance to foreign investment in the United States, the risk of a delayed CFIUS review drastically increases.

Some investment advisors say the proposed changes will create a “presumption of denial” for investments caught by CFIUS. Yet this is exactly how the current regime works in practice for international investment in critical sectors.

It is unclear which investments trigger a CFIUS review. The process itself is treated as a black box, and even if you are approved there is a possibility for political pressures to reverse any decision. Many firms now view CFIUS reviews as fickle as a magic eightball. Paired with the new outbound investment screening regime, the United States is creating more hurdles than incentives for global investors.

One potential increase in investor confidence could come in the form of clarification on second passports. Confusion about second passports especially hinders investment from British citizens. Though United Kingdom (UK) citizens are provided an exemption for CFIUS review, this exemption no longer applies if they are a dual passport holder. Post-Brexit, there is an uptick in second passport possession by British citizens looking to retain easy access to working and living in the European Union (EU). Obtaining a second passport comes at the cost of losing this CFIUS-based exemption. This is especially true for British citizens who hold Irish passports, writing off Northern Irish residents and investment in one fell swoop. By clarifying and reshaping potential citizenship exemptions, investors can begin to adjust their view of CFIUS.

CFIUS is not the only game in town when it comes to foreign investment screening. Countries across the globe have increasingly expanded their own regulatory landscapes to include similar structures.

In the UK, the National Security and Investment Act (NSIA) was passed in 2021. It came into force in January 2022 and has resulted in numerous investment reviews since. The reviews have focused mostly on what CFIUS labels emerging technology and operated as support for other domestic policy goals, including arguing for strengthening domestic industrial production.

When creating the NSIA, the UK government openly utilized CFIUS Foreign Investment Risk Review Modernization Act (FIRRMA) as a starting point for shaping the legislation. Yet they took care to learn from business insight when dealing with CFIUS. This resulted in a regime that permits investment screening and final governmental reviews for critical sectors while also providing businesses with clear timelines and definitions, direct communication from government during the process, and annual reports published by the government on NSIA reviews. These improvements could easily be incorporated into the US CIFUS regime, but are not captured by the NSPM changes. 

Following on from the United States and the UK, the EU is exploring and developing its own regime to standardize reviews across the bloc. If successful, doing so will lead to three of the world’s largest services economies implementing foreign investment screening.

In Canada, the Investment Canada Act was amended in 2024 to strengthen Canada’s approach to foreign investment screening. Changes included CFIUS-style requirements such as pre-closing filing requirements, including investment by foreign state-owned enterprises, and a wider catchment of investments. Reviews are judged both on “net benefit” to Canada and national security measures. This sweeping regime goes further than CFIUS and can be utilized by the Canadian government to review nearly any external investment into the country.

The creation and expansion of these regimes unfortunately only complicates investment flows between trusted allies. When each country is investigating and screening investments, capital flows become slower, more uncertain, and inherently limited.

How can the United States truly work alongside allies to support US industry, innovation, and leadership if it is denying their investment?  Stifling cross-border investment between allies only limits access to capital, stymies innovation and growth, and weakens national security. The United States should be working alongside Western democracies to strengthen global markets and build upon each other’s strengths.

If the administration is looking to drive investment in the sectors of the future, from quantum computing to AI, investors need certainty and clarity. This should be combined with wide access to capital to offer the investment needed to make advancements.

CFIUS reform needs to be structured to drive investment, not complicate it. This means providing more insight into the process, clear evidence guidance for firms from application to completion, structured definitions of sectors covered, and defined timelines. Learning from the application of investment screening in other countries and openly engaging with businesses and investors to understand their concerns is an easy starting point.

Alex Mills is an international trade expert specializing in financial services, maritime law, and ESG. They have nearly a decade of experience across the private and public sector, including in UK and US government.

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