U.S. lawmakers propose foreign investment review board amid scrutiny of Trump trade-linked deals

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US lawmakers propose investment board

Highlights

Sen. Tammy Baldwin and Rep. Ro Khanna introduced legislation to create a Foreign Investment Review Authority to vet direct foreign investments in the U.S.
Initial reviews would target China, Japan ($550 billion), South Korea ($350 billion), and Taiwan ($500 billion) investment commitments tied to trade deals or U.S. trade actions.
The bill mandates ethics and economic benefit tests, bans investments from certain adversarial entities, and grants the board authority to prohibit or suspend non-compliant deals.

Proposed oversight framework and review scope

As first reported by CNBC, Sen. Tammy Baldwin and Rep. Ro Khanna are introducing legislation to establish the Foreign Investment Review Authority, an independent executive branch board that would determine whether direct foreign investments in the U.S. are permissible.

The proposed body would include a chair appointed by the president and confirmed by the Senate, designees from the Commerce and Labor departments and the attorney general, plus four presidential appointees from the party opposite the president, also subject to Senate confirmation. The bill also creates an Office of the Chief Ethics Officer and a Public Oversight Board to receive complaints.

Under the legislation, early reviews would cover investment commitments by China under the direction of the U.S.-China Board of Trade, Board of Investment or a similar institution, as well as pledges cited by the lawmakers from Japan for $550 billion, South Korea for $350 billion and Taiwan for $500 billion. More broadly, any commitment by a foreign country to invest in the United States as part of a trade agreement or in response to tariffs, embargoes or other U.S. trade authorities could fall under review.

Worker protections, ethics tests and broader market impact

Baldwin and Khanna say the measure is designed to prevent foreign capital commitments from harming U.S. workers or being used to secure improper influence. Baldwin says in a statement that while foreign investment can support jobs and local economies, it can also allow adversaries to undercut American workers and enable a president to profit personally.

The review process would test each covered investment for economic benefit, job creation, sourcing, competition and ethics. A deal would be cleared only if the chief ethics officer confirms compliance with the bill's transparency and ethics rules, the board finds a net economic benefit for the U.S., and the investment is not otherwise prohibited.

Investments from adversarial nations would face heightened scrutiny. The bill would bar deals involving entities controlled by companies on the Uyghur Forced Labor Prevention Act list, firms subject to a withhold release order, or arrangements judged more likely than not to provide personal financial benefits to a U.S. government official. The board would have authority to suspend or prohibit investments it finds impermissible, adding a new layer of oversight to trade-linked capital flows and potentially raising compliance demands for foreign investors.

Our earlier article on the Critical Defense Ownership Review Act covered lawmakers’ push to expand Department of Defense scrutiny of private equity acquisitions of defense contractors. We noted the proposal would trigger DoD review when a private equity firm gains significant control, add financial-stability screening for acquirers and targets, and require recurring assessments of competition and national security risks as deal activity in the sector accelerates.

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