Mr. Trump, who campaigned on punishing China over its trade practices, has been pushed by his hard-line trade advisers, Peter Navarro and Robert E. Lighthizer, to embrace more aggressive measures.
That has frustrated Mr. Mnuchin, a former Goldman Sachs executive, who has counseled Mr. Trump against pursuing restrictions that would target China specifically, warning that could create unnecessary diplomatic and legal complications, according to people familiar with the discussions.
In late May, Mr. Mnuchin helped orchestrate a meeting among the president, top White House advisers and Republican lawmakers, in which he appealed to lawmakers to help make the case to Mr. Trump that legislation would be a more targeted way to police Chinese investment. But Mr. Navarro and Mr. Lighthizer, the United States trade representative, who were also at the meeting, objected to that approach, and the president ultimately overruled Mr. Mnuchin, saying he supported the congressional legislation but that it alone was not enough.
Congress is expected to vote on the legislation as part of a defense-spending bill this year. On Tuesday, the House passed its version of the bill, which would grant Cfius broader authority to block investments over national security concerns.
Mr. Mnuchin has privately expressed frustration that other members of the administration’s economic team were trying to box him in to taking a more hawkish approach to China, and he has expressed concern to the president that such an approach, combined with the escalating tariffs, could dampen the economy and disturb financial markets.
In recent weeks, Mr. Mnuchin had maintained a low profile as the White House proposed tough trade measures on China that he had opposed. But on Monday, amid growing fears that the Trump trade wars could hurt American companies, Mr. Mnuchin re-emerged. After reports in The Wall Street Journal and Bloomberg detailed the rollout this week of draconian Chinese investment restrictions, the secretary fired off a Twitter post “on behalf of” Mr. Trump calling the stories “fake news” and hinting that Treasury would support a broader proposal to protect American intellectual property that would not be “specific to China, but to all countries that are trying to steal our technology.”