On Monday, the US Commerce Department announced new export controls on advanced chips used to train and run artificial intelligence, the latest in a series of increasingly tough restrictions enacted by the Biden administration in the past few years. It’s primarily a mechanism for maintaining American dominance in artificial intelligence while also cutting off adversaries — first and foremost China — from access to the chips they need to level the playing field commercially and militarily.
Under the new export regime, the US will use a three-tier system: Companies from the US and 18 close allies, including the UK, Germany, and Japan, are fully free to buy these chips. Those from countries subject to US arms embargo, such as China and Russia, are completely cut off from acquiring high-powered chips. And countries from every other country will face a set cap restricting the number of AI processors they can buy each year without special permission. This latter group even includes strategic partners such as Mexico, Switzerland, and Israel.
“This policy will help build a trusted technology ecosystem around the world and allow us to protect against the national security risks associated with AI, while ensuring controls do not stifle innovation or US technological leadership,” US Secretary of Commerce Gina Raimondo said in a press release.
But the chip industry isn’t happy — particularly America’s most important chip designer, Nvidia, which said that the rules are “misguided.”
“While cloaked in the guise of an ‘anti-China’ measure, these rules would do nothing to enhance US security,” Ned Finkle, Nvidia’s vice president of government affairs, wrote in a statement. “Rather than mitigate any threat, the new Biden rules would only weaken America’s global competitiveness, undermining the innovation that has kept the US ahead.” The Semiconductor Industry Association criticized the timing — just days before the presidential transition.
Tinglong Dai, a professor at Johns Hopkins Carey Business School, said that US companies are increasingly aligned with national security concerns and “face ever greater challenges to making a profit or even operating in China.” In that way, he said he expects that short-term discomfort will give way to companies falling in line with national security priorities.
Xiaomeng Lu, director of geo-technology at Eurasia Group, expressed concern about implementation. “Under this regime, only a small number of trusted allies have unrestricted access to high-end semiconductors,” she said. “Data centers located in over 100 countries will have to apply for licenses through an onerous process, even if they are owned and operated by US cloud service providers.” She added that the rules could discourage many countries from buying US products.
“This rule is not just about China, but it may make China’s chip smuggling efforts more difficult,” said Jacob Feldgoise, a data research analyst at Georgetown’s Center for Security and Emerging Technology. “The regulation could hurt American businesses, including AI chip companies and cloud service providers, but perhaps more importantly, the rule may hurt the United States’ relationship with a set of allies to which the rule didn’t give preferential treatment.”
Jeremy Mark, a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center, said that China is deeply embedded in the semiconductor supply chain, such as supplying important rare earth metals to chip makers. In this way, the US is risking a “serious trade conflict” in further cutting off China.
But there may be more to the story. “There has been clear, bipartisan support in Washington for export controls, and that has empowered several government agencies to act,” Mark said. “However, it’s not clear how much the latest initiatives have been driven by a White House decision to hand Trump a fait accompli.”
Trump won’t want to appear weak on China, but he also doesn’t want to alienate important industry players. Dai said he expects Trump to maintain a tough stance on China and to “tweak the current export rules — because he’s Trump after all.” The rule doesn’t go into effect for companies until May 15, Feldgoise noted, giving Trump time to revise the rules if needed.
As for China, the country is forging ahead even without access to the top chips. Recently, the Chinese startup DeepSeek released an open-source large language model that has impressed outsiders. This development proves it’s “possible to build a quality model with less advanced chips,” Lu said. Meanwhile, the new Commerce Department restrictions will “undermine US companies’ competitiveness in the face of robust competition from China,” she adds.
