Adam Chilton on Trump's Block of a Chinese Takeover of a Sensitive US Company

Trump just blocked a Chinese takeover of a sensitive U.S. company. Here’s what’s going on.

Two days ago, President Trump issued an order blocking the $1.3 billion sale of a Portland, Ore.-based company called Lattice Semiconductor to private equity firm Canyon Bridge Capital Partners. The stated rationale for Trump’s order was national security. Shortly after the deal was announced, Reuters reported that Canyon Bridge’s capital came from China’s State Council, the top decision-making body of the government, which has links to the Chinese military. Even though the managers of Lattice welcomed the sale and made concessions to try to make it possible, the Trump administration stopped it, saying that allowing Chinese investors to own it would threaten the United States’ national security.

Blocking the sale of Lattice is part of a broader trend. Even in cases where the national security implications of sales have been less clear, Chinese investors looking to buy U.S. companies have been facing increasing scrutiny. Over the past several years, we have been researching the role that politics plays in regulating investments between the United States and China. We find that even though the explicit justification for U.S. hostility to Chinese investments is national security, much of the real politics involves the question of whether China is willing to reciprocate U.S. market openness by opening up its own companies to U.S. investors.

It’s unusual for the president to prohibit sales between private parties like this, but it is perfectly legal where the sale poses national security risks. An obscure multiagency committee known as the Committee on Foreign Investment in the United States (CFIUS) has legal authority to review foreign acquisitions of U.S. companies that meet certain criteria. If CFIUS determines that a proposed deal is a national security risk, the president can stop it.

Read more at The Washington Post