The Trump administration said it would rely on an existing Treasury Department-led committee to restrict new Chinese investments in American technology companies, backing away from a more aggressive approach that would have declared a national economic emergency and dramatically limited China’s ability to invest in the United States.
Both the House and Senate have passed versions of a bill to increase the panel’s authority to review a variety of investments not covered under current law, including minority stakes. The measures passed with strong bipartisan support in both chambers. On Tuesday, the House bill was approved by a margin of 400 to 2.
The move caps an intense internal debate between Treasury Secretary Steven Mnuchin, who favored working within the beefed-up CFIUS process, and trade hard-liners like Peter Navarro, a White House adviser. The administration’s get-tough-on-China faction urged the president to employ sweeping powers under the International Emergency Economic Powers Act (IEEPA), which would have allowed him to impose harsh limits.
The president was presented with this recommendation on Tuesday and agreed to it, Mnuchin told reporters. He said White House advisers were “100 percent unanimous” in favor of the decision.
“We have different views and the benefit of the president having different advisers is at times we will express different views. That’s a healthy process. I respect at the end of the day it’s the president’s decision,” Mnuchin said.
Officials had considered preventing Chinese-owned companies from acquiring more than 25 percent of American firms that own sensitive technologies.
Early reaction from at least one prominent Republican was negative. “If in fact President Trump is now backtracking on tough limits on Chinese investment, it is a VERY BIG MISTAKE,” Sen. Marco Rubio (R-Fla.) wrote on Twitter. “#China is strategically buying up U.S. companies specializing in cutting edge technology. What they don’t steal from us they buy away from us.”
The president previewed his decision on Tuesday in brief remarks during a White House meeting. “We’re going to protect it. And that’s what we were doing. And that can be done through CFIUS. We have a lot of things we can do it through. And we’re working that out.”
On Wednesday, the president said the proposed legislation would allow the U.S. to protect its technological crown jewels without compromising an open investment climate. “I have concluded that such legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity,” he said.
Mnuchin told reporters the White House expected it would have all the tools it needs once the new law is passed by Congress. He said if Congress failed to pass the law, the White House would take executive action in a way that bolstered its existing powers.
Mnuchin also said the Trump administration is using CFIUS to scrutinize proposed deals more thoroughly than the Obama administration. He added that there were some investment deals allowed by the Obama administration that would have been blocked by the Trump administration, though he declined to name which ones.
The administration’s action grows out of a report by the Office of the U.S. Trade Representative, which concluded that China seeks to acquire American technology through such investments. But the CFIUS process applies to all foreign countries not just China.
Wednesday’s announcement comes amid an intensifying trade dispute between the U.S. and China. Tariffs on $34 billion in Chinese products are scheduled to take effect on July 6, with additional trade barriers planned in subsequent weeks. China has pledged to retaliate with equivalent measures.
In addition, Trump directed Commerce Secretary Wilbur Ross “to lead an investigation of issues related to the transfer and export of critical technologies.” No deadline was set for his conclusions. Some administration officials had suggested that new export limits would be announced this week.
The president also directed his top advisers to work with U.S. allies to bolster efforts to combat intellectual property theft and improper technology acquisition.