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Top dealmakers and investors have warned that the incoming Trump administration could use the approval of cross-border deals to pressure foreign governments into aligning with US policy priorities, such as increased defence spending.
Several advisers who have been in discussions with people close to the president-elect said Donald Trump was determined to use all government agencies to push other countries to support his agenda, including by withholding deal approvals for their companies.
“Certainly we are preparing for this,” said one European merger and acquisitions banker. “The people in this administration have no compunction about using every lever at their disposal to achieve their aims.”
Trump is expected to put pressure on European countries to increase their defence spending to as much as 5 per cent of GDP and push for more favourable terms from trading partners. He has threatened to levy tariffs on imports into the US from Europe and other allies.
Inbound deals are overseen by the Committee on Foreign Investment in the US, or Cfius, which screens transactions for national security risks to the US. The inter-agency panel is chaired by the Treasury secretary and includes officials from foreign and domestic intelligence agencies as well as top economic advisers and representatives from major 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 approvals process, once largely bureaucratic, has become increasingly politicised under the first Trump and now the Biden administrations, according to several people who spoke to the Financial Times. In practice, the committee has broad purview to determine what constitutes a national security risk, creating room for political manoeuvring.
“Cfius [has] wide discretion to do what they want, as long as there is some national security nexus,” said one cross-border deals lawyer. “There are some deals [in the pipeline] right now — let’s see what happens when they go through the Cfius process.”
Bill Reinsch, chair in international business at the Center for Strategic and International Studies, said the 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 represented the first time a US president has intervened to stop a transaction involving a non-Chinese company acquiring a target that has no US military contracts. That rejection is now the subject of a lawsuit.
“The president early on announced his opposition to the deal, and that poisoned the well and sent a strong message about what the bureaucrats should do,” said Reinsch. “[Trump’s] tendency is to view these things from a personal point of view, and what he thinks are in his interests. It will be political under him, too.”
A spokesperson for the Treasury declined to comment about Cfius becoming politicised under Biden. The Trump transition team did not respond to a request for comment.
During his first term, Trump sought to restrict social media platform TikTok, which is owned by Chinese parent company ByteDance, in part through a Cfius review. He also blocked Singapore-registered chipmaker Broadcom’s attempted $142bn hostile takeover of rival Qualcomm in 2018, based on Cfius recommendations.
“The first Trump president was an amateur,” said another lawyer focused on foreign investment. “This time around he will know how to press the levers of power and he won’t just use Cfius, he’ll use antitrust agencies, the Fed and much more . . . it will all be highly unpredictable.”
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