Trump May Soften Plan to Restrict Chinese Investments

WASHINGTON — President Donald Trump signaled on Tuesday that the White House may soften a plan to impose sweeping new investment restrictions on China, saying he supported giving more power to an existing government body that reviews foreign investments for national security threats.

No final decisions have been made and Trump could ultimately decide to move ahead with the type of tough bans on Chinese investment in U.S. companies he has been threatening as part of his crackdown on Beijing’s trade practices. The administration, which has threatened China with tariffs on as much as $450 billion worth of its products, had promised to outline by Saturday proposed restrictions on Chinese investment to protect U.S. companies it says were pressured to hand over valuable technology and trade secrets to operate in China.

The White House is still expected to unveil by Saturday restrictions on exporting sensitive American technologies abroad. That could have a more significant effect on United States companies than restrictions on Chinese investment, since it would limit the ability of U.S. companies to sell a range of products to China. The White House has targeted specific products it wants to prevent China from dominating, including robotics, artificial intelligence and new energy vehicles.

But people familiar with the discussions said, at least on the issue of Chinese investment, the White House was leaning toward endorsing a current effort in Congress to expand the authority of the Committee on Foreign Investment in the United States, or CFIUS, which reviews investments for security threats.

“We have the great scientists, we have the great brains,” the president said Tuesday. “We’re going to protect it. And that’s what we were doing. And that can be done through CFIUS. We have a lot of things we can do it through. And we’re working that out.”

In a statement Wednesday, China’s commerce ministry said that officials “are playing close attention to it and will assess the potential impact on Chinese companies.”

The congressional overhaul to CFIUS would include a list of “countries of special concern” that allow it to review investments from those nations, but stops short of specifically naming China as the target.

Such an outcome would be a victory for Trump’s more moderate economic advisers, including Treasury Secretary Steven Mnuchin, who has tried to use his clout with the president to de-escalate trade tensions with China. Mnuchin has argued internally that congressional efforts to strengthen security checks were sufficient to guard against threats to American technology and targeted enough to avoid disrupting the U.S. economy.

Mnuchin has tried to prevent the administration from employing aggressive measures against China, including an effort by some in the White House to use the International Emergency Economic Powers Act, which would allow the administration to take broad action against China by declaring a national emergency. Secretary of State Mike Pompeo had recently joined Mnuchin in his arguments, these people said.

Trump, who campaigned on punishing China over its trade practices, has been pushed by his hard-line trade advisers, Peter Navarro and Robert Lighthizer, to embrace more aggressive measures.

That has frustrated Mnuchin, a former Goldman Sachs executive, who has counseled Trump against pursuing restrictions that would target China specifically, warning that could create unnecessary diplomatic and legal complications, according to people familiar with the discussions.

In late May, Mnuchin helped orchestrate a meeting among the president, top White House advisers and Republican lawmakers, in which he appealed to lawmakers to help make the case to Trump that legislation would be a more targeted way to police Chinese investment. But Navarro and Lighthizer, the U.S. trade representative, who were also at the meeting, objected to that approach, and the president ultimately overruled Mnuchin, saying he supported the congressional legislation but that it alone was not enough.

Congress is expected to vote on the legislation as part of a defense-spending bill this year. On Tuesday, the House passed its version of the bill, which would grant CFIUS broader authority to block investments over national security concerns.

Mnuchin has privately expressed frustration that other members of the administration’s economic team were trying to box him in to taking a more hawkish approach to China, and he has expressed concern to the president that such an approach, combined with the escalating tariffs, could dampen the economy and disturb financial markets.

In recent weeks, Mnuchin had maintained a low profile as the White House proposed tough trade measures on China that he had opposed. But Monday, amid growing fears the Trump trade wars could hurt U.S. companies, Mnuchin re-emerged. After reports in The Wall Street Journal and Bloomberg detailed the rollout this week of draconian Chinese investment restrictions, Mnuchin fired off a Twitter post “on behalf of” Trump calling the stories “fake news” and hinting that Treasury would support a broader proposal to protect U.S. intellectual property that would not be “specific to China, but to all countries that are trying to steal our technology.”

The president appeared to endorse Mnuchin’s statement Tuesday, saying that “it’s not just the Chinese.”

Tensions between the United States and China have threatened to boil over for months as the two countries negotiated over trade relations and brandished threats of rapidly escalating tariffs. The Trump administration plans to impose tariffs on its first $34 billion of Chinese goods July 6, penalties that Beijing has promised to match in kind.

The tariffs, investment restrictions and export controls are all part of the administration’s plans to combat what it describes as intellectual property theft from China and to slow the country’s efforts at dominating cutting-edge technologies that will be critical to future economic growth, an industrial plan known as Made in China 2025.

The White House had previously said it would release details on investment restrictions and export controls before Saturday, and put the measures into place days after that deadline.

Some lawmakers have also been looking for ways to curb Trump’s protectionist tendencies, which go against the Republican Party’s embrace of free trade. On Tuesday, some senators tried to restart an effort to force a floor vote on legislation that would require the president to seek congressional approval before imposing tariffs over national security concerns.

A bipartisan effort to add such language to a defense policy bill this month was derailed by Senate Republican leaders, who raised procedural concerns. This time around, however, it appeared more likely that the senators, led by Bob Corker, R-Tenn., would secure a vote through an amendment to the farm bill under consideration by the Senate this week.