Letter to the Trump Administration on Chinese Foreign Direct Investment

From the outset of your efforts last year to reset the global economic order, rebalance trade between the United States and its partners, and reindustrialize the American economy, American Compass has been an outspoken advocate for the importance of this effort and the promise of your administration’s approach. We have not shied away from voicing disagreement with particular tactics that we thought unwise, but always offered our criticism in a constructive spirit and with a commitment toward achieving what we believe to be shared goals. We have been looking forward to celebrating the first anniversary of Liberation Day next week.

We are writing now to express our deep concern about public reports,¹See, e.g., Shawn Donnan, “China Plays to Trump’s Soft Spot for Offering Investments in the US,” Bloomberg, Oct. 6, 2025. and comments you have made,²See Pres. Donald Trump, Remarks at the Detroit Economic Club, Jan. 13, 2026. indicating that you may pursue a major commitment of foreign direct investment (FDI) from China into the United States as part of your upcoming discussions with President Xi Jinping. Any FDI from China is contrary to the American national interest for reasons that we enumerate in our paper, A Hard Break from China.³A Hard Break from China, American Compass, Jun. 8, 2023; see also Oren Cass & Gabriela Rodriguez, “The Case for a Hard Break with China,” Foreign Affairs, Jul. 25, 2023. The asymmetry between its authoritarianism and state-dominated economy on one hand, and our democracy and free markets on the other, means that investment in either direction accrues to our adversary’s advantage. When it comes to China, achieving reciprocity, which you have rightly made central to your trade strategy, is simply not possible.

American firms pursuing profit in China had their technology stolen and then were forced out by subsidized competition, as your first administration carefully documented in justifying its Section 301 tariff actions. Chinese firms operating at the behest of the Chinese Communist Party (CCP) in the United States would likewise steal our technology and use subsidies to undercut American firms on our own soil. CCP control of critical inputs to our supply chains already poses an unacceptable risk to our national security. CCP control of vertically integrated supply chains all the way through to the employers of American workers would be far worse. Nothing would prevent subsidized Chinese firms from dominating the American market as they already dominate so many others and then withdrawing vital production activities back to China, hollowing out the American heartland even further. We would welcome the opportunity to brief members of your team on these challenges.

Here, though, we want to emphasize an additional concern: that acceptance of FDI from China will badly undermine the broader strategy that you have pursued since taking office. In negotiations with our trade partners, your team has repeatedly emphasized the need for them to reject investment from China and match U.S. tariffs on China.⁴See, e.g., Leonardo Lara, “BYD Shelves Plans to Build Major Mexico Car Plant Over Trump’s Trade War,” Bloomberg, Jul. 2, 2025; Alexandra Stevenson, “Trump Wants the World to Squeeze Out China,” New York Times, Jul. 3, 2025; Eric Martin, “Mexico to Raise Tariffs on Imports From China After US Push,” Bloomberg, Aug. 27, 2025; Michelle L. Price & Rob Gillies, “Trump Threatens Canada with a 100% tariff over its China Trade Deal,” Associated Press, Jan. 24, 2026. Your tariffs on China have also driven more of its surplus production toward our partners’ markets, compelling them to decide whether to align with the United States and accept our proposed terms of partnership or else capitulate to Chinese domination. As your Treasury Secretary, Scott Bessent, wisely advised the Europeans, aligning with China on trade “would be cutting your own throat.”⁵“Bessent Says Aligning with China on Trade Like ‘Cutting Your Own Throat,’” Agence France Presse, Apr. 9, 2025.

Welcoming FDI from China into the United States would collapse what you have been building. Whereas you have achieved enormous progress securing major investment commitments from partners such as Japan and Korea, accepting a commitment from China would have the opposite effect. Neither American nor other western firms will rationally make significant new efforts to rebuild our domestic capacity if they believe they will have to compete against the Chinese model here the same way they have tried and failed in China. American trading partners will not push China out while the United States is welcoming its investment in, which means American firms will lose in those markets too. Europe, currently struggling to decide whether it will defend its own industrial base or abandon it, will choose the latter.

Your trade policy asks American firms and consumers to bear short-term costs, which represent necessary investment toward reindustrializing the United States and restoring balance with our trading partners. The payoff will be a more innovative and resilient economy, faster growth, lower debt, better jobs, and a stronger national defense. But the strategy depends upon recognition that China’s state-dominated economic model is incompatible with free and fair trade, and on creating a trading bloc that keeps out the CCP and its subversion of the free market. 

By contrast, pursuing Chinese FDI would repeat the mistake that the world made a generation ago when it welcomed China into the World Trade Organization. As with cheap imports then, the decision by North American, European, and East Asian countries to welcome large-scale Chinese investment now, and accept the Chinese industrial dominance that follows, may deliver the appearance of a short-term gain. Economists will undoubtedly cheer. But the result will be the much greater long-term pain of American decline. 

As you prepare to meet with President Xi, please consider that allowing Chinese investment into the United States would be an enormous concession from you, not him, and one that our nation cannot afford to make.