INTRODUCTION Contributed by: G. J. Ligelis Jr, Cravath, Swaine & Moore LLP
2025, the Trump administration announced the USA would provide USD20 billion of support for Argentina in an effort to preserve an ideological ally in the region. The return of industrial policy and protectionism Several high-profile pieces of legislation and rulemak - ing in the USA and the EU from recent years reflect a global resurgence of industrial policy. The impact on FDI is palpable as supporters of industrial policy or even outright protectionism regain influence in devel - oped economies and chart the course of advance - ment in developing economies. Although significant elements have been rescinded, terminated, paused or delayed by the second Trump administration, the implementation of 2022’s major, stimulative US legislation, the CHIPs and Science Act, the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, set the stage for increased industrial protectionism and has driven calls for responses to this stimulus from other nations. The second Trump administration has built upon these tools of trade restrictions, government subsidies and targeted regulation by taking direct equity stakes in certain critical companies, obtaining “golden shares” or governance rights in others and steering ownership of other companies into friendlier hands, all in an effort to strengthen existing manufacturing in the USA and “reshore” or “friendshore” production elsewhere. Similar industrial policies have been enacted around the world, such as China’s “Made in China 2025” strategy or India’s “Make in India” strategy. The EU has also responded in kind, ranging from the adoption of proposals for a European Green Deal to the Euro - pean Council’s approval of the European Chips Act to bolster semiconductor production in direct response to the US Act of the same name to a push for a “Made in Europe” industrial strategy. These developments demonstrate that industrial policy is here to stay in the current market environment and will become an increasingly important factor in country- and industry- specific FDI. Moreover, while the costs and benefits of interna - tional trade were once the subject of debate primar - ily between economists and policy specialists, the second Trump administration has made internation -
al trade a core part of its geopolitical strategy. The administration has significantly increased tariffs on imports into the USA, imposing substantial new tariffs against Canada, Mexico, and China since February 2025 and virtually every other country worldwide as part of the “Liberation Day” tariffs announced in April 2025. The dust continues to settle as the size and scale of tariffs fluctuate and the USA renegotiates the United States–Mexico–Canada Agreement and negotiates other trade deals with foreign nations largely on a country-by-country basis. However, these tariffs, as well as responses from China and the rest of the world, have had and will continue to have a highly significant impact on FDI. National security restrictions Against the backdrop of these tensions and political headwinds, governments around the world have been re-evaluating their regimes for reviewing and approv - ing inbound FDI, which have become more proactive, broadly applicable and widespread in recent years. In the US, the passage of the Foreign Investment Risk Review Modernisation Act in 2018 and its implemen - tation expanded the scope of transactions subject to review, required certain mandatory filings for the first time and shifted the focus to transactions involving critical technologies, critical infrastructure and sensi - tive personal data. In the UK, the National Security and Investment Act became law on 29 April 2021 and came into effect at the start of 2022. The Act implemented a new regime for reviewing FDI in the post-Brexit world. Across Europe, new or revamped FDI review procedures have been implemented in the Netherlands, Belgium, Denmark, Luxembourg, Slovakia, Sweden, Estonia, Bulgaria, Romania and Ireland, among others. On top of FDI regimes, the European Commission’s For - eign Subsidies Regulation, under which transactions involving parties that have received “distortive foreign subsidies” from their home countries are subject to screening and review, came into effect in July 2023. In addition, in the USA, heightened scrutiny of inbound investment has also expanded to outbound invest -
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