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Leading traders and investors have warned that the incoming Trump administration could use the approval of cross-border deals to pressure foreign governments to adapt to US policy priorities, such as increased defense spending.
Several advisers who spoke to people close to the president-elect said Donald Trump was determined to use all government agencies to force other countries to support his plan, including withholding contract approvals for their companies.
“We are certainly preparing for this,” said one European M&A banker. “People in this administration have no qualms about using every lever at their disposal to achieve their goals.”
Trump is expected to pressure European countries to increase their defense spending even 5 percent of GDP and seek more favorable terms from trading partners. He threatened to impose tariffs on imports into the US from Europe and other allies.
Inbound transactions are overseen by the Committee on Foreign Investment in the US, or Cfius, which reviews transactions for national security risks to the US. The interagency commission is chaired by the secretary of the Ministry of Finance, and includes officials from foreign and domestic intelligence agencies, as well as top economic advisers and representatives of major government ministries. If a deal is deemed to have unresolved security risks, Cfius may recommend that the president block or place conditions on the transaction.
The approval process, once largely bureaucratic, has become increasingly politicized under the first Trump administration and now the Biden administration, according to several people who spoke to the Financial Times. In practice, the board has broad authority to determine what constitutes a risk to national security, creating room for political maneuvering.
“Cfius [has] broad discretion to do whatever they want, as long as there is some national security nexus,” said one cross-border lawyer. “There are some agreements [in the pipeline] right now — let’s see what happens when they go through the Cfius process.”
Bill Reinsch, head of international business at the Center for Strategic and International Studies, said Cfius’ analysis of Nippon Steel’s planned purchase of US Steel was more political than it should have been. Joe Biden’s rejection of the deal marked the first time a US president has intervened to stop a transaction involving a non-Kunei company acquiring a target that does not have US military contracts. That refusal is now the subject of a lawsuit.
“The president announced his opposition to the deal early, and that poisoned the well and sent a strong message about what the bureaucrats needed to do,” Reinsch said. “[Trump’s] the tendency is to look at these things from a personal point of view and what he thinks is in his interest. It will also be political under him.”
A spokesman for the Treasury Department declined to comment on Cfius being politicized under Biden. Trump’s transition team did not respond to a request for comment.
During his first term, Trump sought to limit social media platform TikTok, which is owned by Chinese parent company ByteDance, in part through a review of Cfius. It also blocked a chip maker registered in Singapore Broadcom’s $142 billion hostile takeover attempt competitor Qualcomm in 2018, based on Cfius recommendations.
“The first Trump president was an amateur,” said another lawyer focused on foreign investment. “This time they will know how to press the levers of power and they will not only use Cfius, they will use the antitrust agencies, the Fed and more. . . everything will be very unpredictable.”
