Allies Viewed as Less Willing to De-Risk From China If US Eases Export Controls
U.S. allies, including in Europe, may back away from their plans to de-risk from China if they continue to see the Trump administration use export controls as a bargaining chip in trade negotiations with China, a panelist said during an event this week hosted by the Center for a New American Security. Others said they’re skeptical about the sustainability of the trade deals announced by the U.S. last week, especially those that commit other countries to large purchases of American goods.
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Panelists during the event discussed the results of a trade war-game carried out by the think tank, which tried to simulate how foreign governments might respond to future trade conflicts with the U.S. Emily Kilcrease, director of the CNAS Energy, Economics and Security Program, said the war game showed that other countries “froze” on their efforts to de-risk from China if the U.S. also de-prioritized those efforts in pursuit of a trade deal with Beijing.
“No country team really wanted to think seriously about de-risking from China if the U.S. was no longer pushing that effort,” she said. “I do think it's an important question about how much that's going to play out in the real world.”
The Trump administration earlier this year announced plans to relax its China-related controls for shipments of Nvidia’s advanced H20 chips as part of a trade agreement with China (see 2507150013). And although U.S. officials said they still plan to deny China the most advanced U.S. chip technology (see 2508010002), industry officials have questioned whether the move could backfire on the U.S. the next time it tries to convince allies to restrict their advanced technology shipments to China (see 2507160046).
Kilcrease noted that the U.S. has been “showing more willingness to negotiate over things like export controls,” including those related to U.S. national security, which traditionally is “not something we negotiate over.” The Biden administration pushed its allies, including the Japanese and the Dutch, to strengthen controls over sales of advanced chip manufacturing equipment to China.
“If I'm, for example, Japan and the Netherlands, who's been on the receiving end of a lot of U.S. asks on things like export controls over the past couple of years in critical sectors like semiconductors, all of a sudden I'm really questioning what the U.S. strategy is and if there's going to be an ask of those sorts of countries on things like export controls or any sort of de-risking effort,” Kilcrease said. “I do think they have to ask how durable the U.S. position is going to be on these issues.”
Wendy Cutler, vice president of the Asia Society Policy Institute and a former U.S. trade negotiator, said the administration’s China policy appears to still be “a work in progress,” adding that there are “so many conflicting steps being taken.” Along with its easing of export controls, Cutler wondered whether the U.S. has also refrained from announcing a trade deal with Taiwan “in case China pushes back.”
Cutler said the administration likely will try to reach a deal with China in the coming months, and she’s expecting it largely to involve “big purchases by China” and focus less on larger, structural issues, such as U.S. objections to Chinese excess capacity.
“The type of deal we saw during Trump 1.0 that Ambassador [Robert] Lighthizer led, the phase one deal, which was about 50, 60, pages, including not only purchases which everyone focused on, but frankly, a lot of rules-based chapters -- I just don't see the interest in that this time around.”
Cutler also said she thinks trade deals announced by the Trump administration last week are “very fragile.” She noted that some foreign ministers, including from Japan, received pushback for not securing their deal in writing. Japanese opposition party members criticized the government this week, according to the Japan Times, with one official saying: "This is the Trump administration we’re talking about. If we don’t issue a written document, (the U.S.) will keep stretching the deal while Japan continues getting ripped off. Doesn’t everyone agree?”
Cutler said she understands why details weren't written down. “Because when you try and write down what you agree to … other issues come up, and you realize that maybe you weren't on the same page on certain details,” she said. “I think in these negotiations, there may be a real gap between folks’ understandings of just fundamental provisions of the agreement.”
Kilcrease said these “handshake deals” will ideally transition into solid agreements over time that align closely with the rules-based trading order, such as including binding commitments not to increase tariffs. She said she would “love to see things move in that direction” but questioned whether they will.
“I think it is a real question about the durability of these deals, particularly if there's something that happens with one of these trading partners that is problematic from a broader policy perspective, or if there is something else that the Trump administration doesn't like. Will they jack up the tariffs again?” she said. “I do think that is a real risk.”
Cutler also said she’s unsure whether countries that agreed to buy more U.S. goods will be able to follow through on those commitments. “Governments can buy the fighter jets, but some of this other stuff has got to be purchased by private companies,” she said. “I think those commitments are going to be a work in progress for the next three-and-a-half years as well.”