One of the most important parts of last week’s bill to fund the government that wasn’t included was new limits on American investments in China. These limits would have mainly affected advanced technologies like AI, semiconductors, and quantum computers.
Rep. Rosa DeLauro of Connecticut, who is the top appropriator for the Democrats in the House, has said that Elon Musk, CEO of Tesla TSLA +3.01%, worked with Republicans to get that rule taken away to protect his interests in China.
According to DeLauro, Musk has “extensive investments in China in key sectors and personal ties with Chinese Communist Party leadership.” He said that this “calls into question the real reason Musk was against the original funding deal.”
People have been worried for a long time that Musk and Tesla’s big investments in China will change how the Trump administration treats the country, even though Trump ran as a “China hawk.”
A China expert at the Atlantic Council’s GeoEconomics Center told BourseWatch, “It was not a good sign that legislation that was agreed upon by both parties was taken out of the bill and that one of the biggest investors in China seemed to have a hand in that.”
When asked for comments, neither the Trump transition team nor Musk replied right away.
Experts say that pressure on U.S. companies doing business in China has been growing and is likely to continue to grow since Trump has put China hawks in other key government positions. It’s not clear if Musk pushed against the provision.
Rep. Michael Waltz (R-FL) and Sen. Marco Rubio (R-FL) will be important people in his White House. As national security advisor and secretary of state, respectively, they will be Republicans. A Republican from New York, Rep. Elise Stefanik, will also be an ambassador to the UN. All three members of Congress have worked together before on bills that limited investment from other countries.
From the national security team’s combined legislative background, the Trump administration should create an outbound screening regime centered on three main issues: stronger sanctions, sector-specific restrictions, and wider bans on publicly traded PRC securities and derivatives. This is what Kit Cotkin, an expert on technology and national security at the Atlantic Council, said in a Friday analysis.
Also, the law that was taken out of the bill would have mostly written down rules that President Joe Biden’s Treasury Department had already put in place.
The rule, which starts on January 2, says that people can’t invest in Chinese companies that work in areas like AI, quantum computing, and electronics.
Anyone in the U.S. who wants to make these investments will have to let the government know. The Treasury secretary will then talk to the Commerce Secretary and other related officials to decide if an outbound investment would be dangerous to national security.
Following this rule and the suggested laws would give the president the final say on whether to allow an outbound investment. This could make Musk’s close relationship with Trump more significant than the success or failure of any specific law.
Mark from the Atlantic Council said that Musk’s ability to influence decisions about outbound investment in ways that benefit himself personally “has to be a worry.” He also said that the first Trump administration’s approach to stopping Chinese technological development was “a bit scattershot,” but that the U.S. government under Biden has made the process more formal.
“The whole process is now much more organized and thorough,” he said. “From now on, the question will be how far will the U.S. government stay on that path and how far will we see a return to unpredictable rulemaking and enforcement?”
On the other hand, Democrats will try to use Musk’s ties to the Trump government and China for political gain.
A Democrat from Massachusetts named Rep. Jim McGovern went on X over the weekend to say that Trump and Musk are crooked. This is likely to be his main line of attack for the next four years.
He wrote, “President Musk got what he wanted: the chance to leave the U.S. and make money in China.” “For these guys, it’s all one big game.”
