The United States has launched a comprehensive strategy to restrict China’s access to cutting-edge artificial intelligence (AI) and semiconductor technologies. This bid to maintain dominance began to take shape back in October 2022, when the U.S. Department of Commerce enacted strict export controls aimed at curbing technological advancements made by its chief rival.
Since then, there have been significant developments, particularly on December 2, 2024, when the Department announced new measures adding 140 companies to the Entity List. These rules expanded the scope of the Foreign Direct Product Rule (FDPR) and introduced restrictions on new technology areas, including high-bandwidth memory. By January 2025, the Department had rolled out two new policies: the AI Diffusion Framework and the Foundry Due Diligence Rule, reshaping the export controls framework.
During this period, Gina Raimondo, then-Secretary of Commerce, articulated the U.S. strategy, stating, “America leads the world in artificial intelligence. America leads the world in advanced semiconductor design. We’re a couple of years ahead of China. No way are we going to let them catch up.” Her comments highlight the stakes of technology competition as America seeks to safeguard its technological edge over China.
The initial set of controls, initiated on October 7, 2022, marked what many described as a reversal of nearly 30 years of trade policy. Updates followed, including significant control revisions on various chips and semiconductor manufacturing equipment (SME) released by October 2023. Nevertheless, even these efforts have not entirely thwarted China’s technological ambitions.
For example, the Chinese AI company DeepSeek unveiled impressive AI models trained using chips stockpiled before the imposition of U.S. controls. Not just any models, the Deepseek-R1 reasoning model utilized Nvidia H800 chips, which were not subject to restrictions before October 2023, and delivered results far beyond expectations. The release of these models was so significant, it reportedly caused technology stocks, including the Nasdaq, to falter.
Joe Biden's administration also took steps to review outbound investments related to the AI and semiconductor sectors. This executive push began with the issuance of orders under the International Emergency Economic Powers Act (IEEPA) and culminated with the Treasury Department announcing its final rule on the implementation of these initiatives, effective January 2, 2025.
Despite rigorous efforts from the U.S. side, achieving success hinges, to a large degree, on the cooperation of allied nations like the Netherlands and Japan. The Dutch government, for example, has recently aligned its policies more closely with U.S. controls, announcing plans to implement similar restrictions as those enacted by the U.S. back on October 2022. Japanese officials followed suit, but delayed enforcement until July 2023, prompting significant concerns over the practical effectiveness of allied cooperation, especially with Chinese firms exploiting these delays for stockpiling technologies. According to reports, the value of semiconductors imported by China surged from $2.9 billion during the months before the controls to $5 billion over the same period one year later.
Notably, China’s ambassador to the Netherlands, Tan Jian, remarked on the ramifications of these decisions, saying, “This will not be without consequences. I’m not going to speculate on countermeasures, but China won’t just swallow this.” His words underline the geopolitical tensions exacerbated by such export controls and the potential for retaliatory actions from China.
The U.S. export control regime, including tools like the Entity List and the FDPR, operates under the premise of outmaneuvering strategic competitors. If nations like Japan or the Netherlands hesitate to impose strict controls, the efficacy of such American measures could be diminished. A clear coordination effort among allies is not just beneficial but imperative if the global technological battleground is to be effectively navigated.
Gregory C. Allen from the Center for Strategic and International Studies highlighted the significant gaps between U.S. and allied export control systems. While U.S. allies implement list-based controls under multilateral agreements, these structures lack the agility present within the U.S. apparatus. For example, to amend agreements like the Wassenaar Arrangement requires unanimous consent, making timely updates challenging and ineffective.
Consequently, the United States must work seamlessly with its allies to adapt to the rapidly changing technological landscapes. Enhancing bilateral coordination and negotiations should become focal goals, with the intent to unify approaches toward strategic technology transfers and countermeasures against adversaries.
Supply chain vulnerabilities, whereby Chinese firms circumvent export regulations, expose weak points in the allied nations’ legislative structures. Given the historical responses to similar geopolitical pressures, it is evident how aligned efforts are necessary for staving off strategic losses. Addressing these gaps effectively will require both cooperative diplomacy and stringent regulatory measures to establish equivalently restrictive regimes internationally.
While the initial export controls served to impede certain technological accesses for Chinese firms, the overarching dynamic necessitates beyond mere prohibitive measures. The U.S. needs to be proactive, ensuring its legislative frameworks not only articulate strictures but also adapt dynamically to response actions undertaken by China and potential actions of allied nations.
Looking forward, timely implementations and inter-country communication are now more important than ever. Implementing corrective measures against waning compliance from allied nations will be pivotal to fortify U.S. technological leadership and mitigate potential repercussions posed by rivals’ advancements.