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Following days of speculation, President Donald Trump announced on February 13, 2025, a new tariff policy outlined in a Presidential Memorandum entitled the “Fair and Reciprocal Plan” (Plan).  The Memorandum directs key trade and economic U.S. government agencies to take action against trading partners that impose tariffs, taxes, non-tariff barriers (NTBs), or other restrictions on U.S. goods and services. At this time, no new tariffs have been implemented.

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On February 10, 2025, President Trump issued two Presidential Proclamations reimposing and expanding tariffs on all steel and aluminum imports into the United States pursuant to Section 232 of the Trade Adjustment Act of 1962. These measures effectively supersede prior alternative arrangements, including tariff-rate quotas (TRQs) negotiated with key U.S. trading partners such as the European Union (EU), the United Kingdom (UK), Japan and others, while also revoking country-specific exemptions previously granted to Canada and Mexico. The Proclamations represent a substantial escalation of U.S. trade policy in the metals sector and reaffirm the national security rationale that underpinned the original Section 232 tariffs imposed in 2018.

 

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Following President Trump’s February 1, 2025, announcement of a sweeping set of tariffs on imports from Canada, Mexico, and China, citing immigration concerns and the flow of fentanyl, trade tensions have lurched unpredictably between escalation and temporary resolution. While negotiations between heads of state on February 3, 2025, led to a 30-day pause on both U.S. tariffs for Canada and Mexico and parallel retaliatory measures, the 10% tariff on imports from China took effect at 12:01 a.m. on February 4, 2025. 

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After months of anticipation, on February 1, 2025, President Trump announced the imposition of significant tariffs on Mexico, Canada, and China through three Executive Orders (EOs). While additional details are expected to be published in the Federal Register in days to come, the tariffs mark a significant shift in U.S. trade policy. At this time, negotiations appear underway between the United States, Mexico, and Canada relating to the timing of the tariffs. 

Key points are outlined below.  

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On January 20, 2025, Donald J. Trump was inaugurated as the 47th President of the United States. Within hours of taking office, President Trump issued dozens of executive orders and an “America First Trade Policy” memorandum outlining his administration’s trade priorities and signaling an aggressive approach to reshaping U.S. trade, sanctions and national security policies. However, “Day 1” tariffs did not materialize despite previous announcements by President Trump that China, Canada and Mexico would be targeted. President Trump has informally suggested that 25% tariffs for Mexico and Canada and an additional 10% tariff for China remain possible by February 1, 2025.

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On January 13, 2025, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued an Interim Final Rule (IFR), establishing new export controls targeting advanced artificial intelligence (AI) chips and model weights for advanced AI models to protect against national security risks associated with AI while promoting American AI technological leadership. This framework is a tailored strategic initiative designed to regulate the spread of advanced AI models and prevent their access by malicious actors. It enables “secure and responsible foreign entities and destinations” to utilize leading U.S. AI models and the powerful IC clusters needed for their training. Entities that do not comply with established safety and security protocols will not be granted access.

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On January 15, 2025, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) released an interim final rule (IFR) updating export controls on advanced computing semiconductors. This IFR seeks to ensure that customers of “front-end fabricators” and Outsourced Semiconductor Assembly and Test (OSAT) companies cannot evade controls on advanced computing ICs by misrepresenting the performance capabilities of their integrated circuit (IC) designs.

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On January 16, 2025, the European Commission issued a recommendation encouraging EU Member States to begin reviewing outbound investments in critical technologies including AI, semiconductors and quantum technologies to assess whether such transactions pose risks to EU economic security (the “Recommendation”). The Recommendation constitutes a call for Member States to establish or adapt existing investment screening mechanisms in consultation with relevant stakeholders. The  underlying objectives of the Recommendation are to: (i) ensure the protection of home-grown EU technologies that could bolster military or intelligence capabilities of adversarial states; and (ii) foster a fact-based understanding of the risks posed by outbound investments.

Background

This development follows from the EU’s adoption of its Economic Security Strategy (EES) in January 2024. The EES constituted a major initiative by the EU Commission to address vulnerabilities in the bloc’s national security strategy in light of escalating geopolitical tensions, the current state of significant global economic integration, and the development of sensitive technologies. It called for and envisioned a move towards several objectives, including assessing the need for an EU outbound investment review mechanism.

This latest step follows on from similar initiatives on the other side of the Atlantic. For example, the U.S. recently adopted outbound investment screening measures focusing on sensitive technologies such as semiconductors, artificial intelligence (AI) and quantum computing (see our discussion of this update here). As highlighted further below, the Recommendation serves as another example of coordination between the EU and the U.S. in relation to national security and trade policy measures.

The Assessment Framework Outlined in the Recommendation

In actioning the Recommendation, Member States are instructed to consult with relevant stakeholders (including businesses, academia and civil society) and to focus on outbound investments in the same sectors as those covered by the U.S. outbound investment screening measures, namely: semiconductors (including their design, manufacturing and input materials); AI (especially generative AI with applications in the biotechnology, space and defense sectors); and quantum technologies (including in relation to quantum computing, communications and sensing).

The Recommendation further suggests that Member States should review:

  • current and new transactions as well as past transactions completed since January 1, 2021 (or earlier, if a Member State considers that a transaction poses a particular concern);
  • transactions entered into by “EU Investors” (i.e., persons resident or established in the EU), including mergers, acquisitions, transfers of assets, greenfield investments, joint ventures, and certain non-controlling / minority investments;
  • indirect transactions (e.g., where made through an entity established in a non-EU jurisdiction or in the context of a joint venture with a non-EU entity); and
  • transactions that entail a gradual transfer of assets over time, amongst other types of transactions.

Key risks that Member States are advised to assess for when screening outbound investments include:

  • the potential impact of the transaction on EU economic security taking into account whether the entities engaging in the transaction participate in EU projects or programs (i.e., collaborative projects or programs funded at EU level, involving organizations across Member States, and aimed at achieving EU policy objectives), where relevant; and
  • the risk of technology leakage taking into consideration the main types of threats and threat actors, relevant geopolitical factors and behavioral patterns in relation to technology acquisitions, where relevant to the likelihood of negative impacts on EU economic security.

The Recommendation states that when conducting risk assessments, Member States should take into account aspects of transactions such as: their context; the maturity level and general availability of the technology in question in the country targeted by investment; the value chain and supply chain of the technology involved; how the technology may develop and its potential use cases; the extent to which the ecosystem of the technology is interconnected and whether the company in question participates in any EU projects or programs.

The Commission notes that the EU Expert Group on Outbound Investment established in July 2023 is working to develop a common methodology for assessing outbound investment transactions. Member States are encouraged to follow this when it is available.

Reporting on Actions Taken

The Recommendation also urges Member States to exchange information about how they are implementing the actions outlined in the Recommendation, to report on the progress of their work in this regard to the Commission by July 15, 2025, and to submit a comprehensive report on the same to the Commission by June 30, 2026. Where Member States identify any key risk factors relating to outbound investments that are likely to affect the EU’s economic security, details should be provided to the Commission.

Takeaways

The Recommendation stops short of introducing a formal outbound investment screening mechanism at the EU level but is a warning that there may be one to come, depending on feedback following implementation of the Recommendation by Member States.

EU companies engaging in outbound investments involving critical technologies should be aware that such transactions are likely to come under increasing scrutiny under national laws of Member States in the near term.

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Earlier this week, the U.S. Office of Foreign Assets Control (OFAC) and the UK Office of Financial Sanctions Implementation (OFSI) published a Memorandum of Understanding (MoU), which was previously signed on October 9, 2024, formalizing a framework to govern cooperation including in relation to exchanging information, coordinating investigations, training personnel, discussing regulatory expectations and economic analyses.

Part of a Broader Trend of U.S.-UK Collaboration

The MoU represents a significant step within a broader shift toward increased collaboration between the U.S. and UK on sanctions adoption and enforcement. Several key developments exemplify this trend:

  1. OFAC-OFSI Partnership: The MoU formalizes the growing partnership between OFAC and OFSI, which has been developing through initiatives such as the deployment of OFAC secondees to OFSI and the establishment of regular communication channels.
  2. Joint Guidance: U.S. and UK authorities have increasingly worked together to issue joint guidance (such as this Humanitarian Assistance and Food Security guidance note), streamlining compliance expectations and providing unified directions to stakeholders.
  3. Coordinated Sanctions Adoption: Both countries have increasingly aligned their sanctions measures, particularly in response to geopolitical crises such as Russia’s invasion of Ukraine. Sanctions have been adopted not only bilaterally but also in coordination with allies through forums such as the G7, the Five Eyes community and in collaboration with the EU, signaling a commitment to unified enforcement. By way of recent example, last week, OFAC and OFSI jointly designated two Russian energy companies, Gazprom Neft and Surgutneftegas.

The UK Sanctions Regime’s Shift Toward a U.S.-Style Framework

The MoU has emerged in the context of a broader transformation of the UK sanctions regime, which has gradually been evolving to align with the U.S. regime. Key examples of this shift include:

  1. Civil Strict Liability Powers: As reported previously, the UK has introduced civil strict liability enforcement powers for OFSI and the newly established Office of Trade Sanctions Implementation (OTSI). Absent from the UK sanctions regime prior to Brexit, these powers bring the UK’s sanctions regime closer in line with the U.S. strict liability approach to sanctions enforcement, without a requirement to prove intent or negligence.
  2. Increased Use of General Licenses: The UK has significantly expanded its use of General Licenses, a tool that mirrors OFAC’s approach and provides flexibility in sanctions implementation by permitting UK sanctions authorities to adopt general exemptions for specific activities otherwise prohibited under sanctions laws.
  3. Post-Brexit Autonomy: Following the UK’s exit from the EU, the UK has sought to collaborate with other allies and partners with the intention of pooling expertise, sharing and developing ideas, and extending collective reach to maximize the impact of sanctions and to address loopholes. The UK’s collaboration in this regard with the U.S. (and its approach in general, as referenced in the UK government’s policy paper on the UK sanctions strategy published in February 2024) has spanned sanctions strategy, design, implementation and enforcement, and has also sought to prevent circumvention.

Implications

The MoU between OFAC and OFSI marks a significant turning point in the enforcement of sanctions, underscoring growing alignment between U.S. and UK authorities. At its core, the MoU enhances the ability of the U.S. and the UK to collaborate on key areas such as information sharing, joint investigations, and regulatory alignment. This increased coordination means that businesses must prepare for greater scrutiny and the possibility of facing enforcement actions simultaneously in both jurisdictions.

For companies, the impact of this cooperation extends beyond compliance obligations. Internal controls and monitoring systems must be robust enough to withstand the enhanced scrutiny that comes with shared intelligence and enforcement efforts between regulators. Compliance programs should be harmonized to address both U.S. and UK requirements so as to reduce the risk of oversight in a rapidly converging regulatory environment.

 

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On December 16, 2024, the EU issued its 15th package of sanctions against Russia, new designations under the Belarus sanctions regime, and the first designations under the hybrid threats sanctions regime adopted in October 2024. These updates are summarized below.

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