Trump's China Agenda Could Include Broader Outbound Investment Restrictions, Researchers Say
The next Trump administration is likely to build on Biden’s outbound investment executive order and semiconductor export controls against China, researchers said last week, and could double down on sanctions against Iran and Venezuela in a return to the “maximum pressure” campaign Trump embraced during his first term.
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Emily Kilcrease, director of the Center for a New American Security’s Energy, Economics and Security Program, said the Treasury Department’s new outbound investment restrictions align particularly well with what is expected to be a continued hard line by the U.S. around national security concerns involving China.
“I think the outbound program is here to stay,” she said on the Derisky Business podcast hosted by CNAS. “I think the only question is how fast and how much do they expand that set of authorities.”
The outbound investment rules, which take effect Jan. 2, create new prohibitions and notification requirements to limit certain U.S. business activities in China’s semiconductor, artificial intelligence and quantum sectors. Kilcrease said she “would not be surprised” if Trump looked to expand those rules to other Chinese technology sectors or “go deeper within” those three industries to capture a broader range of technologies.
She also said Trump could consider extending the restrictions to cover passive investment flows, such as publicly traded securities, which she noted were “largely carved out” of the Treasury rule.
Trump could make those changes either by issuing a new executive order to “put their own stamp on it,” which Kilcrease said “would not be a crazy thing for a new administration to do,” or it could work with Congress. Lawmakers have tried for months to add other countries and industries to the scope of the restrictions, although they haven’t agreed on a way forward (see 2403040084 and 2409230016).
“Even with a unified Congress, Congress has not been unified on their approach to outbound investment,” Kilcrease said, though she said that effort “might get a little bit easier” depending on how committee leadership roles change.
“I don't think this is going away,” she said.
Geoffrey Gertz, a senior fellow in the CNAS Energy, Economics and Security Program, said he also expects Trump to continue the Biden administration’s focus on China-related export controls, although some of that will depend on who fills political roles within the Commerce Department. He noted that early signs show that the Trump administration is being filled by “China hawks” -- pointing specifically to Sen. Marco Rubio, who Trump is expected to nominate to serve as secretary of state (see 2411120031).
“It does seem like this sort of more committed China hawks group … will have a fair bit of influence in this administration,” Gertz said. “So I expect this will be an area where they keep on increasing pressure.”
He specifically said he’s expecting a “steady ramp up on semiconductor export controls” to build on the Biden administration’s efforts to restrict exports of advanced chips and chip manufacturing equipment destined to China. The Bureau of Industry and Security released its first set of those China-related chip controls in October 2022 (see 2210070049), and it issued updates in October 2023 (see 2310170055) and in April (see 2404010020). Gertz said BIS may be overdue for another update.
“I think there's a good chance that it will still come out in the rest of the Biden term, although we'll see,” he said. “But I expect that sort of regular cadence of expanding and strengthening and looking to close down potential loopholes or diversion of chip export controls will be an area of focus for the Trump team.”
Kilcrease also said Trump could look to increase sanctions pressure on Iran, which could mirror his maximum pressure campaign that aimed to stop Iran’s nuclear weapons development. She also said the new administration could put more pressure on Venezuela, which faced eased restrictions from Biden earlier this year as the administration tried to convince the country’s Nicolas Maduro-led regime to hold free and fair presidential elections (see 2310180070). Biden later reversed some of that sanctions relief (see 2401300014) after the Maduro regime interfered in the elections (see 2407290044).
But Kilcrease also said more sanctions on Venezuela could conflict with Trump’s immigration policies, saying that more financial restrictions could cause more Venezuelans to flee the country and possibly migrate to the U.S.
“So how do they think about the interplay between the sanctions policy and the migration policy? I think that'll be interesting to watch,” she said. “But I think some of their initial instincts are to increase pressure there.”
It’s also unclear how Trump will handle sanctions against Russia, Kilcrease said, given that he repeatedly promised during his presidential campaign that he will end the Russia-Ukraine war in one day.
“I do think there's a question about whether there's going to be much more significant pressure from the United States on Ukraine to wrap this thing up. And in order to do that, will there be sanctions relief as part of that equation that the U.S. is offering to Russia?” she said. “I think we have to consider that a possibility at this point.”