By opting for the expanded use of CFIUS instead of new controls on Chinese investment, Trump appears to be trying to ease the tensions between the two sides slightly. And it fueled a temporary rally in financial markets, which had been reeling on fears of an escalating trade war.
The decision marks a somewhat softer approach to curbing Chinese investments pushed by Treasury Secretary Steven Mnuchin, while other senior Trump advisers had argued for harsher, China-specific curbs invoking an emergency economic powers.
It was unclear whether the policy shift would lead to a truce between the world's two biggest economies, which have been edging toward a high-risk confrontation, or whether any formal negotiations might soon begin.
Kudlow denied reports that he's interviewing a replacement for himself. And analysts said they took heart that the administration had offered some semblance of an olive branch to Beijing.
"We still haven't seen a clearly defined strategy by the administration that the market can look to in terms of determining what we expect the future moves to be on the trade agenda", said Selig.
A May 29 statement from the White House pledged "specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology". The legislation would give the interagency panel expanded authority to review cross-border business deals - other than takeovers - that involve sensitive technology transfers or sites near sensitive USA government facilities and have national security implications. Beijing is seeking such technology as part of its "Made in China 2015" initiative, a roadmap to its goal of becoming a global tech leader.
Reasons Supreme Court Upheld Trump's Immigration Pause
Chad initially was on the list of countries targeted by Mr Trump that was announced in September, but he removed it on April 10. On immigration and national security matters, the court has historically deferred to the executive branch of government.
The White House will push Congress to strengthen an inter-agency panel that it will employ as its main tool to curb Chinese investments in sensitive US technologies, according to senior Trump administration officials.
In the past, CFIUS reviews, or sometimes just threatened reviews, have halted Chinese purchases of USA semiconductor companies.
The Australian dollar also tumbled (-0.7pc) to 73.4 U.S. cents, its lowest value in at least 13 months. "Using the CFIUS process is a more nuanced approach".
"For those who want to say this is being weak on China, the answer is no", Mnuchin told reporters at briefing on the decision. "The question was, What were the appropriate tools?" "What they don't steal from us they buy away from us".
Intellectual property is a key sticking point in the trade tensions between USA and China, with the U.S. accusing China of stealing its technology. China has aggressively been investing in USA companies, providing a major source of capital for the US market. The president has already imposed tariffs on steel and aluminum, and on billions of dollars worth of goods from China. Part of the USA response includes imposing tariffs on $50 billion of Chinese goods, some of which are set to go into effect next month. But with the ongoing administration concerns about China, it's getting a lot more attention.
President Trump on Wednesday softened proposed limits on China's right to invest in US technology companies, the latest sign of an on-again, off-again trade war that is raising doubts about his ability to wring concessions from Beijing.