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Top dealmakers and investors have warned that the incoming Trump administration could use approval of cross-border deals to pressure foreign governments to align with US policy priorities, such as increasing defense spending.
Several advisers in talks with people close to the president-elect said Donald Trump is determined to use all government agencies to get other countries to support his agenda, including cutting off contract approvals for their companies.
“Of course we are preparing for that,” said one European mergers and acquisitions banker. “There is no obligation for people in this administration to use every lever at their disposal to achieve their goals.”
Trump is expected to pressure European countries to increase defense spending As much as 5 percent of GDP and push for more favorable terms from trading partners. He has threatened to impose tariffs on imports from Europe and other allied countries into the United States.
Domestic deals are overseen by the Committee on Foreign Investment in the United States, or Cfius, which screens transactions for national security risks to the United States. The interagency panel is chaired by the Treasury Secretary and includes officials from foreign and domestic intelligence agencies, as well as top economic advisers and representatives of key government ministries. If a deal is deemed to have unresolved security risks, Cfius can 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 and now Biden administrations, according to several people who spoke to the Financial Times. In practice, the committee has broad scope to determine what constitutes a national security risk, leaving room for political maneuvering.
“Cephius [has] Broad discretion to do what they want, as long as there’s some national security relationship,” said one cross-border deal lawyer. “There are some deals. [in the pipeline] At this point – let’s see what happens when they go through the Cfius process.”
Bill Reinsch, chair of the Center for Strategic and International Studies’ Center for International Business, said Sifus’s 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 represents the first time a US president has intervened to block a deal involving a non-Chinese company that does not have a US military contract. That refusal is now the subject of litigation.
“The president announced his opposition to the deal early on, and that poisoned the well and sent a strong message about what bureaucrats should do,” Reinsch said. “[Trump’s] The tendency is to see these things from a personal point of view, and in the interest of what he thinks. It will be political under him as well.”
A Treasury spokeswoman declined to comment on Cephius becoming politicized under Biden. The Trump transition team did not respond to a request for comment.
During his first term, Trump tried to limit the social media platform TikTok, which is owned by Chinese parent company ByteDance, through a Sifus review. He also blocked the Singapore-registered chipmaker Broadcom made a $142 billion hostile takeover attempt Competitors Qualcomm in 2018 based on Cfius recommendations.
“The first Trump president was an amateur,” said another lawyer focused on foreign investment. “Now he’s going to know how to push the levers of power, and he’s not just going to use Ciffus, he’s going to use the antitrust agency, the Fed, and so on. . . It will all be very unexpected.”
