The China trade deal can't go soft on chips

The Star

a day ago

THE Donald Trump administration's most recent round of trade talks with China has ended, but the great export-control debate is just getting underway.
Export controls were at the centre of the negotiations in London this week; for years, they have anchored America's strategy for economic warfare with Beijing.
China wants few things more than a relaxation of curbs on its access to high-end semiconductors; so do corporate players and analysts who argue that they do more harm than good.
Although the details are hazy, the Trump administration reportedly agreed to lift some recent controls as part of a deal to deescalate the trade war.
Let's hope the administration doesn't go much further than that.
Ditching or dramatically rolling back the measures that preserve American's technological advantage – and that have been imposed, with bipartisan backing, over the past several years – would be strategic self-sabotage of the highest form.
The export controls at issue pertain to the most advanced computer chips and the inputs, both hardware and software, required to make them.
During Trump's first term, the United States hit specific Chinese firms, namely Huawei, with targeted bans.
Under President Joe Biden, Washington went big: It intensified the tech war by expanding their application to cover China as a whole.
Since then, Washington and Beijing have been playing cat-and-mouse, as China has sought to evade tech controls while the United States gradually tightens them.
Export controls can seem arcane, but their purpose is strategically profound.
The goal, as then-National Security Adviser Jake Sullivan said in 2022, was to maintain 'as large a lead as possible' in key sectors like artificial intelligence (AI) and advanced computing, because those sectors will shape the future economic and military balance.
Leaps in AI will affect everything from the lethality of warfare in the Western Pacific to the productivity of US and Chinese workers.
Export controls, designed to keep China from accessing the crown jewels of US and allied innovation – and to exploit Washington's unique position in key nodes of the semiconductor supply chain – are vital to staying ahead in this fateful race.
Doubts remain
Not everyone agrees. The debut of DeepSeek's R1 reasoning model in late 2024 raised questions about the dominance of US AI companies, just as the unveiling of a next-generation Huawei smartphone in 2023 sparked speculation that the company was shrugging off US bans.
Last month, Jensen Huang, the CEO of Nvidia – which makes top-of-the-line chips and would surely love to sell them in China – claimed that US controls have backfired by causing Beijing to push harder for self-sufficiency. But that position ignores a great deal of evidence.
Any honest evaluation starts with a realistic standard for success. The goal of US policy was never to comprehensively halt Chinese innovation.
It was to slow Beijing in key areas that matter most to the future distribution of technological advantage and global power.
If you want to know whether US controls have had that effect, just ask Beijing.
DeepSeek's CEO has admitted that the chip ban is his company's number one obstacle. Chinese leader Xi Jinping and his country's Politburo have acknowledged the pressures US restrictions create.
Xi repeatedly pushed for the easing of export controls in his interactions with Biden.
China wants those restrictions gutted because its leaders understand their power all too well.
This is why Beijing has been wielding its own limits on the sale of critical minerals: Imitation is the surest sign China appreciates the leverage export controls convey.
Other critiques falter under scrutiny. US tech restrictions can't have spurred China's drive for self-reliance: 'Made in China 2025,' Xi's bid to dominate key areas of innovation, was unveiled years before the United States got serious about export controls.
To suggest that a Leninist party-state needs US encouragement to seek technological primacy is to misunderstand how determined, how power-minded, Chinese leaders are.
The major problem with US export controls is the degree to which they have been evaded and undermined.
Nvidia has built chips for export that just barely skirt performance thresholds the United States government has established.
Huawei has used shell companies and other illicit measures for getting prohibited chips. US policy has also been imperfect: The Biden administration's deliberate approach to building bureaucratic and allied consensus around new controls often gave Beijing time to stockpile and blunt their impact.
And if Trump's deal with Xi entails an agreement not to impose new export controls in the future, it will — thanks to the cat-and-mouse dynamic — severely erode America's ability to keep even its existing restrictions effective and up to date.
Leading the way
Export controls can't preserve US advantage by themselves.
Such a strategy also requires running faster, by investing in America's production and innovation ecosystem, and by ensuring this country remains a magnet for global talent.
Trump's approach to those issues is, sometimes, self-defeating: Witness his hostility to foreign students (not just Chinese students) and his attacks on the elite universities that have long been the envy of the world.
But countries don't win fierce tech competitions simply by being the most innovative versions of themselves.
In the Cold War, Washington and its allies used broad export controls and technological restrictions to keep the Soviet bloc well behind. The specific measures will vary, but a similar mindset is required today.
A hot war between the United States and China threatens; the new cold war is well underway. America will struggle to win the technological race that may well determine the outcome if it doesn't slow the enemy down. — Bloomberg
Hal Brands is a Bloomberg Opinion columnist and the Henry Kissinger Distinguished Professor at Johns Hopkins University's School of Advanced International Studies. The views expressed here are the writer's own.