Trump Tariffs Could Lead to More M&A, CFIUS Activity, Lawyer Says
Foreign investment lawyers aren’t expecting a big change in how the Committee on Foreign Investment in the U.S. operates under a second Trump administration, although a new round of tariffs against China and the continued easing of export restrictions among close U.S. allies could change the investment landscape and the number of filings submitted to CFIUS.
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Holland & Knight lawyers, speaking during a Nov. 13 webinar hosted by the law firm, said they expect most CFIUS trends to continue over the next four years, especially the committee’s scrutiny of sensitive investments from China. “Even though we're going to have a change in administration, we do not expect a dramatic veering off from that key consideration that's been shaping up investment policy in the U.S. in the last years,” Antonia Tzinova said.
But Trump’s promise to raise tariffs (see 2408140058), including on China, could lead to more foreign investment activity and potentially more CFIUS filings, said trade lawyer Robert Friedman. He said companies that are “highly reliant” on the U.S. market could soon be faced with a more “expensive trade relationship” with the U.S., and that could push them toward a potential merger or acquisition, especially "if they were on the fence about potentially engaging in, for example, a joint venture with a U.S. counterparty, or maybe even acquiring a U.S. business in order to move production to the United States."
Friedman said he could see more investment activity, “particularly if a company runs the numbers and determines that the cost of the import tariffs are going to be outweighing the cost of engaging in some form of M&A or joint venture activity.”
He also said CFIUS could see a drop in filings as a result of the Biden administration’s efforts to reduce defense trade barriers with the U.K. and Australia. That effort -- which has included reforms to the State Department’s International Traffic in Arms Regulations (see 2410010030 and 2408160019) and reductions in license requirements under the Commerce Department's Export Administration Regulations (see 2404180035) -- means fewer technologies and defense goods will be subject to U.S. export controls.
“That has a direct impact with regard to CFIUS, because it removes from the category of mandatory filings a noticeable number of transactions that prior to those reforms would have made a filing compulsory under the regulations,” Friedman said. “There's now, in many cases, a voluntary filing choice that companies can make, where before they did not have that” option.
“So as a result of those export control reforms,” he said, “we also might see a reduction in the number of CFIUS filings."
Tzinova, who regularly represents clients before CFIUS, also noted that portions of CFIUS’ powers could be expanded under Trump. She said the Trump campaign has said the committee should have jurisdiction over greenfield investments, which is when a foreign party starts a new business in the U.S. from scratch. Tzinova said that would “substantively” change how the committee operates.
She also noted that the Trump administration could side with Republican lawmakers who are looking to add USDA as a permanent member of CFIUS (see 2409050011). The Biden administration opposed those efforts, saying CFIUS can already pull in USDA for help on any review (see 2409110045).
Although adding USDA as a permanent member of CFIUS likely won’t affect the committee’s “process,” Tzinova said it would show dealmakers that the committee is increasingly concerned about foreign purchases of agricultural land.