On February 21, 2025, President Donald J. Trump issued a National Security Presidential Memorandum (NSPM) designed to encourage foreign investment while imposing strict national security protections against adversarial nations, particularly China. The NSPM aims to restrict Chinese investments in strategic U.S. sectors while facilitating investments from allied nations through a fast-track approval process. It also strengthens outbound investment restrictions to prevent U.S. financial and technological resources from supporting China’s industrial and military ambitions.
The memorandum builds upon Trump’s America First economic policies introduced during his first presidency (2017-2021), which significantly altered the U.S.-China trade and investment landscape. The U.S.-China trade war, Section 301 tariffs, restrictions on Chinese technology firms, and enhanced scrutiny of Chinese investments through the Committee on Foreign Investment in the United States (CFIUS) were key measures in Trump’s first term. The revival of these strategies in 2025, combined with expanded financial and regulatory barriers, represents an intensified economic confrontation between the world’s two largest economies.
Policy Objectives and Strategic Intent
The NSPM reflects a targeted investment strategy, balancing economic growth with national security. While it seeks to attract more foreign capital into the U.S. economy, it simultaneously blocks Chinese firms from acquiring critical American assets and technology. The Trump administration has long viewed China as a strategic competitor, accusing it of engaging in intellectual property theft, forced technology transfers, and leveraging American financial markets for geopolitical advantage.
One of the memorandum’s most consequential provisions is the strengthened authority of CFIUS to restrict Chinese investments in technology, infrastructure, energy, agriculture, and healthcare. Trump previously expanded CFIUS’s scope with the Foreign Investment Risk Review Modernization Act (FIRRMA) of 2018, and the new NSPM further tightens its control. Unlike past mitigation agreements that allowed limited Chinese investments under strict conditions, the new directive prioritizes outright rejection of Chinese capital in sensitive industries.
Another critical element is the fast-tracking of foreign investment approvals from trusted allies such as Japan, South Korea, the EU, and Taiwan. The plan to expedite environmental reviews for investments exceeding $1 billion signals an effort to boost high-tech manufacturing and infrastructure development in the U.S.. This measure aligns with Trump’s broader goal of reshoring supply chains and reducing U.S. reliance on China.
Beyond inbound investment, the NSPM also expands restrictions on outbound U.S. investments in China. The administration plans to restrict American capital flows into sensitive Chinese technology sectors, including semiconductors, artificial intelligence, quantum computing, biotechnology, and aerospace. These policies build upon Trump’s 2020 executive orders, which blacklisted Chinese firms linked to the People’s Liberation Army (PLA) and banned U.S. investment in companies supporting China’s Military-Civil Fusion (MCF) strategy. The latest memorandum extends these measures, preventing U.S. pension funds and institutional investors from financing Chinese industrial and military advancements.
Implications for U.S.-China Investment and Business
The new NSPM is expected to fundamentally alter the investment landscape for both U.S. and Chinese businesses. While it may attract greater investment from allied nations, it simultaneously tightens financial barriers for Chinese firms and increases regulatory risks for U.S. companies operating in China.
From a U.S. business perspective, the policy creates new opportunities by prioritizing investment from like-minded nations and streamlining large-scale foreign investments. However, U.S. companies with deep Chinese supply chain ties or joint ventures in China will face operational and compliance challenges. Semiconductor firms, biotechnology companies, and aerospace contractors with existing R&D facilities in China may be forced to restructure operations, as U.S. capital flows into China become increasingly restricted.
The crackdown on Chinese ownership of U.S. farmland and real estate near sensitive facilities also aligns with growing bipartisan concerns over China’s land acquisitions in the U.S.. Reports indicate that Chinese entities own over 350,000 acres of farmland across 27 states, raising fears over food security and espionage risks. The new NSPM aims to limit further purchases and strengthen monitoring of existing holdings.
On the Chinese side, the policy strikes a major blow to Beijing’s ambitions of global investment and technological supremacy. Chinese firms seeking access to U.S. financial markets, talent, and innovation hubs will face greater scrutiny. The new auditing requirements for foreign companies listed on U.S. exchanges could lead to mass delistings of Chinese firms, forcing them to seek alternative capital markets. China’s state-backed initiatives, such as Made in China 2025, rely heavily on foreign capital and intellectual property acquisitions, which will now face severe limitations under Trump’s policies.
Potential Chinese Countermeasures and Global Business Realignment
China is expected to retaliate with a series of countermeasures aimed at mitigating the impact of U.S. investment restrictions while exerting pressure on American businesses operating in China. This may include imposing new regulatory barriers and restrictions on U.S. firms such as Apple, Tesla, and Boeing, making it more difficult for them to operate or expand within the Chinese market. Additionally, China could implement export controls on critical materials such as rare earth elements, which are essential to U.S. defense, semiconductor, and clean energy industries, thereby disrupting supply chains and increasing costs for American manufacturers.
To counter the restrictions on Chinese investment and technology acquisition, Beijing is likely to accelerate its self-sufficiency initiatives by expanding state support for domestic companies in artificial intelligence, semiconductors, and biotechnology. This aligns with existing national strategies such as "Made in China 2025," which seeks to reduce reliance on foreign technology and develop independent industrial capabilities. Furthermore, China may shift its foreign investment focus toward alternative markets, strengthening economic partnerships with BRICS nations, ASEAN countries, and emerging markets in the Middle East and Africa to secure access to capital, technology, and critical resources.
These developments contribute to a broader geopolitical realignment, further fragmenting global supply chains. As U.S. companies face increasing restrictions and risks in China, many will seek to diversify their manufacturing and supply chain operations by expanding production in alternative locations such as India, Vietnam, and Mexico. This shift will accelerate the economic decoupling between the U.S. and China, compelling multinational corporations to navigate an increasingly complex landscape of regulatory barriers, geopolitical tensions, and shifting trade alliances.
Conclusion
President Trump’s 2025 NSPM on Foreign Investment and National Security is a significant escalation in U.S.-China economic competition, reinforcing a policy shift that began in his first term. The strict limitations on Chinese capital, heightened scrutiny of outbound investments, and increased CFIUS authority reflect a long-term commitment to economic and technological containment of China.
For U.S. businesses, the policy opens doors for strategic foreign investments while complicating operations for firms with deep ties to China. For China, the memorandum adds another layer of financial and technological restrictions, further straining its ability to compete with the U.S. in high-tech industries.
This directive will likely intensify tensions between Washington and Beijing, increasing trade, investment, and financial disputes in the coming years. As the U.S. pursues a more protectionist and security-driven investment approach, businesses and investors must adapt to a rapidly changing economic landscape. The next phase of U.S.-China decoupling is now in full motion, and companies on both sides must reassess their risk exposure and strategic priorities accordingly.
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