Analyst: Too Early to Say How Trump Will Treat Tech Investment Rules
Although the new administration appears to be gearing up to build on U.S. outbound investment restrictions against China, President Donald Trump’s affinity toward dealmaking means that tighter rules aren’t a guarantee, an analyst said. Other analysts said the U.S. will face challenges trying to convince its allies in Asia, including Japan and South Korea, to also impose restrictions on outbound deals in China.
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“I think that this is an area to watch very closely,” Sarah Bauerle Danzman, a resident senior fellow with the Atlantic Council, said during an event this week hosted by the Brookings Institution. “I don't think that we have a clear indication of which way the administration is going to go.”
Trump ordered U.S. agencies last month to consider expanding outbound investment restrictions, which place prohibitions or notification requirements for investments in China’s semiconductor, AI and quantum industries (see 2501210023). Bauerle Danzman noted there are “numerous China hawks” both within the administration and in Congress who support expanding the restrictions.
But she also said there are “a lot of dealmakers in the administration,” including Trump himself, who observers say may be willing to negotiate restrictions with China in exchange for trade concessions (see 2502100063). Business executives also have Trump’s ear and could push back on increased regulations, she said, specifically naming billionaires Elon Musk, Jeffrey Yass and other venture capitalists who were “clearly angered by the Biden administration's very aggressive approach to regulation around these issues.”
Those executives could push Trump to roll back investment restrictions, or they could lobby for a carve-out, Bauerle Danzman said. That could mean the U.S. would “have an outbound regime that just has opportunities to be exempted from these requirements,” she said. “And maybe that would be enough for some of the individuals who are really trying to exert a lot of influence in the new Trump administration and who have a lot of business interests in China.”
Bauerle Danzman said she’s specifically monitoring how enforcement priorities change within DOJ, which could impact how closely the U.S. scrutinizes sensitive investments. She pointed to Attorney General Pam Bondi’s decision to disband the National Security Division’s Corporate Enforcement Unit (see 2502060019), a unit that worked on cases involving export control violations, which sometimes involved critical technologies that are the target of investment reviews by the Committee on Foreign Investment in the U.S.
“If you have a decreased amount of enforcement of these kinds of rules, both in terms of export controls, but also looking to see who is actually abiding by outbound regulations,” then “there's a question of: how closely will companies follow the law?” Bauerle Danzman said. “Will there be negative consequences for disregarding it? And so that's something to really look at.”
Bauerle Danzman said she’s also watching to see how Trump handles a law that called for China’s ByteDance to divest TikTok or face a ban of the social media application in the U.S. (see 2501210051).
“Is there an actual deal? If so, who is a part of it? What are the terms? What happens to the algorithm?” she said. “This will give us early indications of whether Trump is going to really, in his administration, take a strong view on the importance of technology control, or if there's more focus on getting deals done.”
Other panelists during the event said that as the U.S. determines how it should implement and enforce its own outbound investment restrictions, it may struggle to get buy-in from key allies such as Japan and South Korea.
Rikako Watai, a professor at Keio University Law School, said Japanese talks around regulating outbound investment in China “have not made much progress” since 2023, when the country and other Group of 7 nations committed to study the issue (see 2305220017 and 2307070029). She said that’s partly because Japan is weary of going down a path that could see its companies “completely cut ties with Chinese businesses” in important technology sectors. She said “decoupling is not realistic,” from Japan’s perspective.
Troy Stangarone, a Wilson Center expert on South Korean economic and foreign policy issues, also said any regulations would need to be carefully crafted so they don’t unintentionally undermine supply chains, including for semiconductor-related technologies, that both South Korean and American firms use.
“Part of this really has to do with our supply chains and how they're set up, and can you change those. Is Apple, anytime in the near future, going to move the vast majority of its production out of China?” Stangarone said. “I think that's unlikely.”
Stangarone said he believes outbound restrictions are necessary, but they may need to be implemented “very selectively.” The concerns “often raised by companies is that the greater restrictions you put on them, the less profitable they become, which means the less they can spend on [research and development],” he said, “and the more likely you're going to see Chinese firms advance beyond the capabilities of U.S., South Korean or Japanese firms.”