Over the course of the presidential campaign, and even more intensely after the election, Donald Trump has made it very clear that he does not like it when U.S. companies invest abroad rather than here at home (except for his companies, of course). His response has been a mixture of pushing state government tax incentives to keep them at home and general haranguing of the companies (as he did with Carrier), as well as threats of tariffs to convince companies not to leave (this sounds like one of those statements that should be taken “seriously but not literally,” but we’ll see).
In terms of the legality of a company-specific tariff, we would need to see a specific proposal—is this going to be done via statute? by Presidential proclamation?—but there would certainly be some serious domestic and international legal hurdles if Trump actually tries to pursue this. I’m not sure what Trump’s economic policies will do for the economy as a whole, but the field of international trade law will be booming.
But there’s also a flip side to the issue of foreign investment that I want to raise here: What does Trump think about foreign companies who want to invest in the United States? This question may seem like a no-brainer: Who would object to new investment? But in recent years, the Obama administration has looked skeptically at some of the investment coming from China, on purported national security grounds. Here’s the latest, from the Wall Street Journal:
President Barack Obama on Friday took the rare step of forbidding a foreign company from buying a firm with U.S. assets, telling a Chinese investment fund that it cannot complete a deal for German technology company Aixtron SE.
Mr. Obama’s move, only his second outright ban on a foreign acquisition, shows the increasing suspicion the U.S. harbors toward Chinese acquisitions of certain U.S. firms, even before the arrival of President-elect Donald Trump, who made criticism of Beijing a cornerstone of his campaign.
In a statement released on Friday, the Treasury Department said Mr. Obama had issued an order barring Fujian Grand Chip Investment Fund LP, part-owned by the Chinese government, from buying Aixtron. The ban follows a recommendation from the Committee on Foreign Investment in the U.S., or CFIUS, which confidentially reviews foreign acquisitions solely on national-security grounds.
U.S. officials have also intervened in Chinese deals involving real estate near strategic military installations. In 2012, Mr. Obama barred Chinese-owned Ralls Corp. from purchasing wind farms in Oregon near a sensitive military facility, the only other recent example of a president forbidding a deal before Friday.
What are Trump’s views on Chinese foreign investment in the U.S.? The WSJ article notes:
During the 2016 primary season Mr. Trump appeared to criticize a Chinese bid for a small U.S. stock exchange, but his transition team hasn’t publicly spelled out its attitude toward foreign investment.
Still, Mr. Trump, who has extensive foreign investments himself, has indicated he would use all available levers against harmful trade practices from China and other countries. CFIUS under Mr. Trump could also expand the definition of national security to include food security and oppose deals from countries that don’t allow comparable U.S. investments, according to a memo obtained by CNN.
In the background of this issue is a bilateral investment treaty that has been under negotiation between the United States and China for many years, and that until recently some people were suggesting could be completed this year. The basic idea is that, through this treaty, China would promise to open up its market to foreign investment in currently closed sectors, and also that there would be an international dispute mechanism under which foreign investors could sue the host country government if certain rights were violated.
Trade agreements have gotten all the attention recently, both what does Trump think of investment treaties? They have been part of U.S. international economic policy since the late 1970s/early 1980s (traditionally, investment obligations were part of standalone treaties, but now they are often included as chapters in free trade agreements), but it is easy to imagine that Trump would oppose them. He may not want to make it easier for U.S. companies (again, other than his) to invest abroad, and he would not want Chinese companies suing the U.S. government in an international court. Will Trump therefore put an end to investment treaties and investment chapters of trade agreements?
Beyond these international investment rules, what does Trump think of Chinese investment in the US more generally? Will he use national security as a justification for rejecting it, as the Obama administration has done?
As with all things Trump, there’s a lot we don’t know, and we will have to wait and see. But hopefully he will be less hostile to foreign investment in the U.S. than he has been to U.S. investment abroad.