It’s the controversial capstone of an aggressive chips campaign. As the Biden administration prepares to leave office, it plans to announce its most expansive export controls crackdown against China. Industry and lawmakers are split. Supporters say the moves will keep the US ahead in artificial intelligence. Opponents argue the plan will upend the global AI market — with dire unintended consequences.
The new US controls will reportedly dictate how many and what kind of US-made AI chips and AI model weights can be deployed across the world — and by whom. The controls promote “a rollout of cutting edge AI to America’s allies” and encourage “geopolitical swing states to align AI policies” with the US, officials and advocates say.
But it will likely upset allies, and Beijing may end up bolstered. The new restrictions reinforce narratives — particularly in Europe — that the US is hellbent on upholding the dominance of US tech firms and driving a global decoupling from China. These tensions could increase if President-elect Donald Trump chooses to wield the rules as leverage in looming trade wars.
In response to US controls, allies could seek alternatives to US tech, creating unparalleled long-term incentives for Chinese competitors such as Huawei, Baidu, Alibaba, and Tencent. US tech groups and Congressional leaders worry the White House is rushing to avoid outside scrutiny and beat the buzzer on President Biden’s term. US officials have declared that the new controls do not represent a “significant regulatory action” — allowing the rule to skirt normally required stakeholder review.
The new controls, dubbed the “Export Control Framework for Artificial Intelligence Diffusion,” will create a global licensing system restricting how many powerful graphics processing units US firms are allowed to export. In private complaints to officials, US industry groups claim the controls are far too strict, hitting “mainstream, everyday” AI applications and impacting more than a quarter of global data center demand. Under the new controls, foreign countries are grouped into multiple tiers with differing sales limits based on the cumulative computing power — not quantity or use case — of the chips deployed in the country.
Although a core group of 20 countries will initially be exempted from the caps, dozens of NATO allies, EU member states, and US partners will be left out. India, Singapore, Vietnam, and Mexico are not exempted, sending them the message that the US trusts you to help build the chips, but not to buy them. Small European tech leaders such as the Baltics and Czechia will also be hit by the caps.
US officials say they have no choice. US industry and allies watered down and delayed previous chip export controls, making them less effective. The Biden administration believes it is pre-empting diplomatic flareups by including most large European and Asian democracies in the unrestricted “AI 20” club.
Local cloud operators could be deemed as “validated end users” if they provide security assurances. The US greenlighted UAE-based G42’s access to Microsoft’s advanced AI tech after the company agreed to limit its China ties. The G42 deal showed how frightened Biden administration officials are of Chinese firms skirting existing controls by accessing restricted US tech in foreign countries, whether via cloud services or smuggling. The new Framework suggests US officials still do not think US firms are doing enough to combat the evasion.
But US strong-arming feeds Europe’s dreams for “digital sovereignty.” It plays into European criticisms about the dominance of US tech firms and extraterritorial applications of US laws. The EU will almost certainly complain that the new export controls unfairly benefit US cloud hyperscalers and dash hopes for European cloud competitiveness.
In response, the EU might invoke an untested law to counter US “coercion.” EU lawyers could also scrutinize whether the US export controls reporting requirements comply with the bloc’s data laws. Talks of forming a European chips coalition to develop alternatives to US tech — in order to reduce US leverage — could accelerate.
Beijing will look to exploit these transatlantic frictions. China could continue retaliating with moves like its recent curbs on drone supplies and critical minerals.
For now, US export controls prevent Chinese firms from exporting high-end AI chips at scale. Dutch semiconductor machine manufacturer ASML CEO Christophe Fouquet claims the US measures are causing China to “lag 10 to 15 years behind the West” in high-end chip manufacturing. But Huawei, SMIC, and other Chinese AI tech firms are making progress in chip making and AI innovation.
It is unclear what policy the incoming Trump administration will pursue. When announcing key administration nominees, President-elect Trump emphasized that his second term will focus on “[winning] the AI arms race with China (and others).” Russia and China are deepening their cooperation on AI. Beijing increasingly views American political divisions as a terminal weakness and US influence in decline.
Trump’s history with export controls is checkered — his first administration kickstarted the chip wars against Huawei but eased controls on ZTE. He is likely to be focused on tariffs, so new US officials could deem the new controls and accompanying regulations are onerous and repeal them.
On the one hand, Trump could try to escalate the controls while addressing US industry’s complaints about the compliance burdens. As analysts have noted, the Trump team could make the controls more effective and palatable to both industry and allies by switching from use-based to country-based controls.
On the other hand, Trump’s recent comments and past willingness to lift controls on Chinese firms could indicate he’d consider easing the controls as part of a “grand bargain” with China. There will inevitably be internal clashes between the administration’s China-hawks and pro-tech voices. This final salvo of chip export controls may be the last for President Biden — but it is almost certain to not be the final battle in the US-China tech competition.
Matthew Eitel is Chief of Staff at the Center for European Policy Analysis (CEPA).
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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