Chinese May Have Gained Export Control Leverage Over US, Expert Says
The U.S. government, together with industry, needs to set clearer guardrails around sensitive technology shipments destined to China, two panelists said during an event on export controls last week. Another panelist questioned whether the Trump administration is willing to set tougher rules, saying Beijing appears to have recently gained extra leverage and adding that the U.S. has for years failed to deter companies from flouting restrictions against China.
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Derek Scissors, senior fellow with the American Enterprise Institute, said the U.S. is “paralyzed” on setting new China-related controls. He said the issue has spanned multiple administrations, accusing the Bureau of Industry and Security under former President Joe Biden of not doing enough to control foundational technologies and saying President Donald Trump favors tariffs over export controls.
He also said the U.S. has been unwilling to enforce the restrictions it does have.
“Regardless of what you think the rules are, I don't think any firm has been punished sufficiently to deter them from circumventing or evading the rules, and without enforcement, the rules don't matter,” Scissors said during an event hosted by AEI. “You need a very serious deterrent to stop companies from evading controls on China. I don't think we've ever taken one.”
Scissors, a Chinese economics expert and a former commissioner on the U.S.-China Economic and Security Review Commission, specifically pointed to advanced chip company Nvidia, which he said declined to speak at the event. Nvidia is “the most prominent example of firms that have worked very hard to circumvent and evade controls and have faced no consequences,” he said.
He questioned whether the Trump administration will be willing to impose more strict China controls, pointing to the two sides’ latest trade dispute over U.S. access to Chinese rare earths. Scissors suggested that China was able to gain leverage over U.S. export control moves by withholding shipments of rare earths. China eventually said it eased its restrictions after the two sides reached a deal in June, which included the Trump administration lifting controls over several American electronic design automation companies (see 2507030009).
“Has Chinese leverage … just ended the U.S.’s ability to do anything meaningful on export controls?” Scissors said. “I think the answer is ‘yes.’”
David Feith, a former State Department official, disagreed, saying he believes Washington has more trade leverage over Beijing than vice versa. Feith, a senior fellow with the Hudson Institute, said the U.S. can tap into an “enormous amount of further escalation capability,” including by using “export controls on all sorts of things" that are "crucial" to Beijing and that are currently “completely unrestricted and uncontrolled, including in the semiconductor space and elsewhere.”
Even so, he said he fears that some in Washington believe China, “as demonstrated with its rare earths move,” has the upper hand.
“I think there is a risk that this idea … should cause the U.S. government to feel cowed from pursuing various actions in the trade and technology space and elsewhere that it needs to pursue for its own national security interests, vis-a-vis China," he said. "That would be, I think, an erroneous and really damaging takeaway."
Asked whether he believes the Trump administration will put in place more “effective” export controls on China, Feith said: “I certainly hope so.” He pointed to Trump’s America-first trade policy from January, which called on U.S. agencies to eliminate export control loopholes (see 2501210023), and noted that both Commerce Secretary Howard Lutnick and BIS Undersecretary Jeffrey Kessler said they want to increase penalties on export control violators (see 2503280039).
The administration’s statements so far “certainly hold out the prospect that we get significant further positive development of export control policy on China,” Feith said.
He also pointed to guidance from BIS in May, which signaled that using Huawei Ascend chips anywhere in the world risks breaching U.S. export controls (see 2505210056 and 2505130018).
“That was an extremely important statement of focus on encouraging the diffusion of U.S. AI infrastructure around the world and getting in the way of China's ambitions to export their own AI infrastructure,” Feith said, “especially these Huawei Ascend chips.”
Both Feith and Aaron Ginn, CEO of Hydra Host, said clearer export control rules will help make U.S. restrictions more effective. Ginn said the issue with the Biden-era AI diffusion rule, which BIS said it plans to rescind and replace, was that it had no clear goal and set arbitrary restrictions on close American trading partners. He asked: “Why was Austria limited, but Germany not? Why was Portugal on the naughty boy list?”
“There was probably a grab bag of eight to five different objectives” in the rule, Ginn said. “That's where you get something super messy.”
Ginn said industry faces uncertainty as the Trump administration crafts a replacement rule. Some industry officials said it’s unclear whether companies should continue complying with the Biden-era rule, considering it hasn't yet officially been withdrawn (see 2506110027).
“There is still kind of a gray box around lots of these questions,” Ginn said. “We're kind of living in this constant limbo of what's allowed and not allowed.”
Feith said the U.S. and industry need to partner to make sure any new controls are unambiguous and that exporters can comply.
“Unless those are drawn clearly and effectively, I think we will fail,” he said. “The blame for the failure will be shared across the government, policymakers and industry. But I think, primarily with this issue set, it's up to the U.S. government to get it right and to force industry to comply with rules they can understand.”