Traders fear that Trump’s diplomacy will put cross-border deals on ice

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Top businessmen and investors have warned that the incoming Trump administration could use the authorization of cross-border deals to force foreign governments to align with US policy priorities, such as increasing defense spending.

Several advisers who have been talking to people close to the president-elect say Donald Trump is determined to use all government agencies to get other countries to support his agenda, including denying approvals to their companies.

“We are preparing for that,” said one European M&A banker. “People in this administration have no intention of using every lever to achieve their goals.”

Trump is expected to pressure European countries to increase their defense spending Up to 5 percent of the GDP And push for more favorable terms from business partners. He has threatened to impose tariffs on US imports from Europe and other allies.

Inward deals are overseen by the U.S. Committee on Foreign Investment, or Cfius, which screens transactions for national security risks. The interagency panel is chaired by the Secretary of the Treasury and includes representatives from foreign and domestic intelligence agencies as well as senior economic advisors and government headquarters. If a contract is believed to have unresolved security concerns, Cfius may recommend that the president block or place conditions on the transaction.

The approval process, once largely bureaucratic, has become more politicized under the first Trump and now Biden administrations, according to several people who spoke to the Financial Times. In practice, the committee has a broad view in determining what constitutes a threat to national security, leaving room for political maneuvering.

“Cfius has broad interest (to do what they want) as long as there is some national security nexus,” said one transnational lawyer. “There are some offers[in the pipeline]now – let’s see what happens when they go through the Cfius process.”

Bill Reinsch, chairman of international trade at the Center for Strategic and International Studies, said the Sipheus analysis of Nippon Steel’s proposed purchase of US Steel is more political than it should be. Joe Biden’s rejection of the deal marks the first time a US president has intervened to target a non-Chinese company without a US military contract. That rejection is now a trial.

“The president has already announced that he will oppose the deal, and it has poisoned the well and sent a strong message to the bureaucrats about what to do,” Reinsch said. “[Trump’s]tendency is to see these things from a personal perspective, and what he thinks is in his interest. “It will be political under him.”

A Treasury spokesman declined to comment on whether Cfius is political under Biden. Trump’s transition team did not respond to a request for comment.

During his first term in office, Trump sought to restrict the social media platform Tik Tok, owned by Chinese parent company ByteDance, in part through a review by Syphys. It also banned a chip maker registered in Singapore Broadcom’s $142 billion attempted hostile takeover. Competitors Qualcomm in 2018 based on Cfius recommendations.

“The first Trump presidency was an amateur,” said another lawyer who focused on foreign investment. “At this point, he knows how to install power plants, and he’s not just using Cfius, he’s using anti-trust agencies, the feds, etc. . . . They’re all going to be very unpredictable.”