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Politico
31 minutes ago
- Politico
Why smuggle chips when you can remote in?
With help from Mohar Chatterjee In the global race to control the most powerful new technologies, America has used aggressive export controls to cut off China's access to high-end microchips. And smugglers have grown ever more creative in evading them: paying students to pack them alongside clothes in luggage, mislabeling shipments as toys or tea, stowing them in container trucks filled with an assortment of other electronics. But there's an easier way for China to tap into the computing power of those microchips: just access them remotely with cloud computing. Last year, Reuters found that at least 11 companies or state-backed entities from China had sought out U.S. cloud services as a back-door way to access the computing power of restricted chips. 'This was always a gaping blind spot that policymakers are waking up to,' said Barath Harithas, a senior fellow at the Center for Strategic and International Studies. 'What's the point of spending all these efforts on smuggling of chips if you can just access the computing capacity remotely?' Lawmakers are trying to close this loophole by extending export controls to cloud computing services. But that effort is about to get a lot trickier — thanks to none other than President Donald Trump. The giant data center deals Trump recently announced in Saudi Arabia and the United Arab Emirates could make it even harder to restrict China's access to computing power by basing providers outside the U.S. 'These countries in the Gulf maintain close relationships with Chinese counterparts and maintain a political position between the U.S. and China,' said Janet Egan, a senior fellow at the Center for a New American Security (CNAS). 'That concerns me when I think about Chinese actors accessing vast amounts of compute.' Controlling computing overseas goes back to the Cold War, and it's been evolving in the AI age. The Biden administration blocked the export of AI chips to China in 2022. It's since tightened the throttle with controls on more chips and on chipmaking equipment. Compared to that push to control hardware, the U.S. has taken a much less focused approach to remote cloud access for AI. The Biden administration packed 'know your customer' rules into its AI diffusion framework issued in January; Trump scrapped that rule in May. Trump's Commerce Department is currently working on a replacement rule, though it's unclear whether it will include cloud provisions. 'It sounds like the administration is still figuring out [the cloud] as it tries to determine what it wants a diffusion rule to look like,' said Michael Horowitz, who served as a deputy assistant secretary of defense under former President Joe Biden and is a scholar on emerging technologies. The Commerce Department did not respond to DFD's questions about the replacement rule. Congress has yet to pass a bill on remote cloud access. In 2024 security report on DeepSeek, the House Select Committee on China recommended 'remote access controls' on all data centers. A bill from Rep. Mike Lawler (R-N.Y.) to extend export controls to the cloud, and block 'CCP-aligned companies' from accessing U.S. technology remotely, advanced out of the House Foreign Affairs Committee in April. 'Closing this loophole is essential to preventing our adversaries like China from accessing restricted technology,' Lawler's communications director Ciro Riccardi told DFD. There's a tension embedded into the cloud computing question. Some Chinese customers use U.S. cloud services for innocuous purposes, like storage or video games, rather than military or AI development – and that can be a good thing, said Sam Winter-Levy, a fellow at the Carnegie Endowment for International Peace. 'So long as the world's AI computing activities stay tethered to the U.S. cloud, policymakers can bake some degree of transparency into the system,' he said. At the same time, Chinese users have been documented trying to set up accounts on Amazon Web Services and Microsoft Azure to access the advanced computing power needed for training AI models – not illegal but also not desirable in light of U.S. policy. In the absence of a government rulebook, cloud companies have implemented some safeguards like 'know your customer' standards on their own – for example, Amazon may require appointing a legal representative and submitting certain identity documents and financial information, depending on the type of use. Where remote access gets dicier is overseas, according to Egan of CNAS. 'As we start to export more chips around the world, particularly in regions like the Gulf, we need more guidelines,' she said. In May, Trump announced a series of AI deals while on a tour of the Middle East, which would result in the sale of tens of thousands of the U.S.'s most advanced AI chips to build data centers in Saudi Arabia and the UAE. The Trump administration has cheered on these ventures, including their implications for cloud computing. 'American companies will operate the data centers and offer American-managed cloud services throughout the region,' Commerce Secretary Howard Lutnick said in a statement. 'These are America First deals that drive investment into the U.S., improve our trade balance, and lock in American technology as the global standard,' White House AI and crypto czar David Sacks wrote in a May post on X. Critics including House China Chair John Moolenaar (R-Mich.) called for scrutiny of the deals, especially in light of Gulf countries' alliances with China. But it's unclear what guardrails exist on the deals, for the chips themselves or the data centers they will power. When asked about the security of the Gulf data centers, the White House pointed DFD to a fact sheet stating that agreements in the UAE include 'strong protections to prevent the diversion of U.S.-origin technology.' Amazon and Microsoft have also inked deals to help those Middle Eastern companies develop their cloud services. Asked about their cloud security measures for those Gulf projects, Amazon said 'AWS complies with all applicable U.S. laws, including trade laws.' Microsoft pointed DFD to a press release stating that its UAE partnership includes a commitment 'to world-leading standards in AI safety and security.' Chris Miller, a Tufts University semiconductor historian and author of 'Chip War,' said the current approach leaves Big Tech companies largely responsible for policing who uses their cloud services, especially when it comes to the data centers planned for the Middle East. 'Different countries and governments have different interests,' Miller said. 'This seems to me to be just as important, if not more important, as where physically the chips and servers are.' EU firms want an AI moratorium too European companies are pushing for a pause on AI regulations, and what they're asking sounds an awful lot like the failed effort backed by Silicon Valley to pause state AI law enforcement in the megabill. As POLITICO's Eliza Gkritsi reports, 46 leaders of the European Union's biggest firms – including Airbus, Mistral, and Mercedes-Benz – sent an open letter Thursday asking Brussels for a two-year delay on implementing its AI Act, which is set to go into effect on Aug. 2. They complain of 'unclear, overlapping and increasingly complex EU regulations' as being a major obstacle to scaling AI systems and competing on a global level. The pause would allow for 'further simplification of the new rules,' they said. The AI Act, which the EU passed last year, includes an overarching set of rules regulating AI systems like chatbots and facial recognition. Those rules include transparency requirements, restrictions on AI-powered surveillance, and a ban on biometric systems that classify peoples' protected characteristics like race. Companies like Meta and Google have criticized the AI Act as unworkable. Henna Virkkunen, the EU's technology chief, told POLITICO that she would decide by the end of August whether to delay enactment of the legislation. THE KOSA POWER PLAY THAT SANK THE AI MORATORIUM At the center of Sen. Marsha Blackburn's decision this week to withdraw support for an artificial intelligence measure she worked on with Sen. Ted Cruz (R-Texas) was her Kids Online Safety Act, according to four people familiar with the situation, POLITICO's Ruth Reader and Mohar Chatterjee report. Those four people, granted anonymity to discuss private negotiations, said Blackburn (R-Tenn.) hoped a compromise to limit the scope and span of the 10-year AI moratorium would allow her to advance her KOSA legislation to markup in the Senate Commerce Committee, which Cruz chairs. The amendment she worked out with Cruz would have allowed states to enforce laws passed in recent years to keep kids safe from online sexual predators, bullying, drug sales and other negative health impacts, but it prevented states from putting 'undue or disproportionate burden' on AI systems. After a coalition of 130 organizations said they opposed that amendment, Blackburn went to Cruz on Monday and tried to get the 'undue or disproportionate burden' language removed from the bill. But Cruz wouldn't budge, one of the people said. By Monday night, Blackburn changed her amendment with Cruz to include KOSA as a symbolic move, three of the people said. She then partnered with Senate Commerce ranking member Maria Cantwell (D-Wash.) to strike the original AI moratorium from the megabill, which lawmakers approved with a 99-1 vote. Cruz's office didn't return a request for comment, and Blackburn's office declined to comment. post of the day THE FUTURE IN 5 LINKS
The Hill
an hour ago
- The Hill
China knocks Trump trade deal with Vietnam
China knocked the newly announced U.S. trade deal with Vietnam, saying Beijing 'firmly opposes' any deal that disadvantages its economy and pledged to take 'countermeasures' to protect its own interests. The trade deal with Vietnam, which President Trump announced on Wednesday, sets the tariff rate on the country at 20 percent, with Vietnam giving the U.S. tariff-free access to its markets. It also seeks to prevent third countries like China from laundering their exports through Vietnam, imposing a 40 percent tariff on goods that originate from a country with a higher import tax rate and shipped through Vietnam. 'China firmly opposes any deal made at the expense of China's interests in exchange for so-called tariff exemptions,' a spokesperson for the Chinese Ministry of Commerce said, when asked about U.S. tariff negotiations 'with certain countries.' 'Should such a situation arise, China will never accept it and will take resolute countermeasures to safeguard its legitimate rights and interests,' the spokesperson continued. The spokesperson said China 'welcomes efforts' by other countries to 'resolve' trade issues with the U.S. 'through consultations on the basis of equality.' 'At the same time,' the spokesperson continued, 'we urge all parties to stand on the side of fairness and justice and on the right side of history in resolutely upholding international trade rules and the multilateral trading system.' The president announced the deal with Vietnam on Truth Social, days before the pause on his sweeping county-specific tariffs is set to expire. The only other country to reach a comprehensive trade deal since tariff 'Liberation Day' in April was the United Kingdom. The Chinese official reiterated Beijing's general disdain for Trump's reciprocal tariffs, which the official called, 'a typical act of unilateral bullying that seriously undermines the multilateral trading system and disrupts the normal order of international trade.' 'China has consistently and firmly opposed such actions. It has been proved that only by firmly defending its principles and position can a country truly safeguard its lawful rights and interests,' the official said. The Trump administration reached an agreement with China last week focused on rare earth exports to the U.S., building on previous talks between the two nations that eased tariffs on imports from Beijing. This week, the Trump administration rescinded some restrictions on the export of chip-design software to China, just weeks after putting the limitations in place.
Yahoo
3 hours ago
- Yahoo
China-Made Tesla Sales Rose in June. Is This the Lifeline TSLA Stock Needed?
Tesla (TSLA) shares are pushing to the upside on Wednesday after data from the China Passenger Car Association confirmed the automaker's sales of China-made electric vehicles increase 0.8% on a year-over-year basis in June. Though modest, the increase is significant given it snapped TSLA's eight-month losing streak in one of its biggest global markets. Despite today's gain, Tesla stock is down 13% versus its high set in the final week of May. Is UnitedHealth Stock a Buy, Sell, or Hold for July 2025? Is MicroStrategy Stock a Buy, Sell, or Hold for July 2025? Circle Just Applied for a Bank Charter. How Should You Play CRCL Stock Here? Get exclusive insights with the FREE Barchart Brief newsletter. Subscribe now for quick, incisive midday market analysis you won't find anywhere else. While China data sure is positive for investors, it's not very likely to help Tesla shares extend gains further since the automaker's overall deliveries for the second quarter came in down 14% year-over-year on Wednesday. The company delivered just 384,122 vehicles in its fiscal Q2, down significantly from 443,956 deliveries in the same quarter last year – reinforcing concerns that TSLA is losing market share to its Chinese rivals. Tesla Inc has recently had a successful launch of robotaxi services in Austin, but it's still reasonable to assume that continued weakness in the core EV business will make it incrementally difficult for TSLA stock to print new highs in the near term. According to Steve Westly, a former member of Tesla's board, the EV maker needs three things to unlock its path to sustainable share price recovery. Tesla must launch a lower-cost ($25,000) model to compete more aggressively with rivals. Tesla needs regulatory approval for its robotaxi in multiple cities to catch up with Waymo. Tesla has to rebrand itself – which means less politics, more products, and lower prices. Westly remains confident that TSLA has the technology to compete across all verticals, but unless it 'finds a higher gear' – this EV stock may continue to fail in delivering the kind of gains that investors have come to expect of it, he told CNBC in an interview today. Investors should note that Wall Street firms are no longer bullish on Tesla stock either. According to Barchart, the consensus rating on TSLA shares currently sits at 'Hold' only with the mean target of about $297 indicating potential downside of some 5% from here. On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Sign in to access your portfolio
