Trump favors tougher foreign investment oversight but stops short of targeting China

White House decides against outright limits on Chinese investment

Treasury Secretary Steven Mnuchin says the US economy is strong due to President Donald Trump's tax plan and deregulation initiatives.

Trump announced 25 per cent import tariffs on hundreds of Chinese products to pressure the country to alter its practices.

Aides had urged Trump to directly impose limits on Chinese investment in USA technology companies, but Trump said he would back congressional efforts to give new powers to the existing Committee on Foreign Investment in the United States (CFIUS).

"The president is unsatisfied with their response on the trade talks, and so he put out there the possibility of an additional tariff measure", Kudlow said, referring to China.

Pittenger's legislation - the Foreign Investment Risk Review Modernization Act - passed the House 400-2 on Tuesday.

The US is planning to impose tariffs on US$34 billion of Chinese goods on Friday next week, an amount that could reach US$450 billion if China refuses to back down and retaliates with sanctions of its own.

The Treasury Department has recommended that Trump use the Committee on Foreign Investment in the United States (CFIUS), whose authority would be enhanced by new legislation in Congress, to control transactions. But major indexes closed lower after White House economic adviser Larry Kudlow told Fox Business Network that the CFIUS decision did not represent a more conciliatory approach to China trade issues.

Trump's trade measures were prompted by United States complaints over Chinese policies that Washington said either forced companies to relinquish key technology or allowed China to steal it outright.

Fears of a trade war are starting to affect financial markets, especially shares of the largest corporations that are exposed to global trends, he said. "Using CFIUS on a case-by-case basis to try to change Chinese approaches to industrial policy would be neither efficient nor effective".

Mnuchin told reporters that these differences had been overblown and there was unanimous backing for the approach being unveiled Wednesday when it was presented to the president for his final approval at a White House meeting the day before.

While House and Senate versions of the bill still need to be reconciled, both bills are created to strengthen the CFIUS review for foreign investment in critically important technologies.

Mnuchin, who chairs the CFIUS review committee, said Wednesday that if Congress doesn't approve a reform bill, the White House will take another look at it powers to protect sensitive US technology.

After CFIUS' review, the president can block transactions found to pose a threat to the national security of the U.S., the official added.

"It is a welcome surprise given the other signals" from the administration, said Jake Colvin, vice president of the National Foreign Trade Council. "It's confused the Chinese about what the US really wants".

"Through this review, we will assess our nation's export controls and make any modifications that may be needed to strengthen them to defend our national security and technological leadership".

Chinese investment in the United States has declined dramatically amid heightened regulatory scrutiny.

"Mnuchin, it seems like he is prevailing on a lot of these disputes", said Steve Moore, who was a top economic adviser to Trump during the campaign.

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