US pauses exports of airplane and semiconductor technology to China

Business Standard

a day ago

The Trump administration has suspended some sales to China of critical US technologies, including those related to jet engines, semiconductors and certain chemicals and machinery. The move is a response to China's recent restrictions on exports of critical minerals to the United States, a decision by Beijing that has threatened to cripple US company supply chains, according to two people familiar with the matter.
The new limits are pushing the world's largest economies a step closer toward supply chain warfare, as Washington and Beijing try to flex their power over essential economic components in an attempt to gain the upper hand in an intensifying trade conflict.
A growing standoff over critical supply chains could have significant implications for companies that depend on foreign technologies, including makers of airplanes, robots, cars and semiconductors.
It could also complicate efforts to negotiate an end to a trade fight over the administration's tariff policies. On May 12, negotiators from the two countries agreed to reduce the punishing tariffs they have imposed on each other for 90 days while negotiators sought a longer-term resolution.
Scott Bessent, the Treasury secretary, said at the time that 'the consensus from both delegations is that neither side wanted a decoupling.' Yet the administration continues to target China with punitive measures. Secretary of State Marco Rubio also announced on Wednesday that the United States would 'aggressively revoke' visas for Chinese students who study in critical fields or who have connections to the Chinese Communist Party.
Since their agreement to roll back tariffs in May, US officials had expected the Chinese to relax restrictions they had imposed on critical minerals. The Trump administration does not appear to be pleased with China's efforts. In recent days, the Chinese have restarted some shipments of rare earth minerals and magnets, but they have been limited, one of the people said. American companies remain concerned about their access to critical Chinese supplies.
In April, China suspended exports of a range of critical minerals and magnets, which are essential for automakers, aerospace manufacturers, semiconductor companies and military contractors around the world. The Chinese government said it had halted the shipments while drafting a new regulatory system.
Beijing's moves were in response to Mr. Trump's decision to sharply increase tariffs on China in early April, to a minimum of 145 percent, after Beijing retaliated against his earlier tariffs. Mr. Trump had imposed levies on dozens of countries globally, citing their unfair trade practices, and warned other countries not to respond in kind.
The new US restrictions appear to be part of a broader review within the Commerce Department of exports of strategic goods to China. The Bureau of Industry and Security, a division within the department, is in charge of granting companies licenses that allow them to export products that have military value or other strategic importance to the United States.
One person familiar with the matter, who declined to be named to discuss private conversations, said the Commerce Department had suspended some licenses that allowed American companies to sell products and technology to COMAC, a Chinese state-owned aerospace manufacturer, for use in its C919 aircraft.
The Commerce Department did not immediately respond to a request for comment.
The C919, a plane comparable in size to the Boeing 737 or the Airbus A320, carried paying passengers for the first time in 2023. Many of the plane's parts, including its engines and components necessary to power and control the aircraft, come from US and European suppliers.
China is a long way away from producing enough planes to meet its needs and, analysts say, will continue to be dependent on Boeing and Airbus for planes, and companies like GE Aerospace for jet engines, for many years to come.
The Trump administration also appears to have paused exports of software, sold by companies like Cadence, Synopsys and Siemens, used to design computer chips.
The Financial Times earlier reported that the Trump administration was restricting exports of chip design software to China. The Biden administration had placed some limits on sales to China of software for the most advanced chips, but most sales were not affected by those restrictions.
China has accelerated its efforts to develop its own advanced chips, particularly since the United States and its allies started restricting exports of advanced chips and the equipment used to make them to curb China's progress in artificial intelligence. But it remains dependent on foreign countries for software and machinery used to make advanced chips.
Representatives for GE, Honeywell, Cadence and Siemens did not immediately respond to requests for comment. Synopsys declined to comment.
China remains one of the United States' largest trading partners, but both countries have increasingly viewed the other as an unreliable source of critical products.
The United States has steadily expanded its restrictions on sharing advanced technology with China and put restrictions on US investments in Chinese tech firms. In recent months, the Trump administration has blocked more sales of artificial intelligence chips to China, and it is weighing further blacklisting of Chinese semiconductor firms.
Chinese leaders have long sought to reduce their country's reliance on foreign resources and products, to allow China to better withstand embargoes, armed conflict and other threats. Beijing has set about subsidizing and dominating certain industries, like electric vehicles, mineral processing and wind turbines. Its exports of huge amounts of low-priced goods have put competing manufacturers in the United States and other countries out of business.
China's rare earth restrictions have further raised alarms among politicians and executives about America's dependence on China for a variety of products and potential vulnerability in case of conflict. While China has flexed its control over supply chains in conflicts with countries before — including banning exports of rare earths to Japan in 2010 amid a political dispute — it has never before cut off such a significant commodity to the United States.
China has criticised US export controls and sought to portray itself as a defender of global trade rules. On Tuesday, the Chinese government met with Chinese and European chip companies to discuss deeper collaboration and brief them on how to request licenses for rare earths, according to Chinese state media.
In a statement, the Chinese commerce ministry said that the security and stability of the global chip supply chain was 'facing severe challenges' and that it 'resolutely' rejected 'unilateralism and bullying.'