Trump Threatens Export Controls on Chips Over Digital Policies

In a social media post the evening of Aug. 25, he wrote, "As the President of the United States, I will stand up to Countries that attack our incredible American Tech Companies. Digital Taxes, Digital Services Legislation, and Digital Markets Regulations are all designed to harm, or discriminate against, American Technology. They also, outrageously, give a complete pass to China's largest Tech Companies. This must end, and end NOW! With this TRUTH, I put all Countries with Digital Taxes, Legislation, Rules, or Regulations, on notice that unless these discriminatory actions are removed, I, as President of the United States, will impose substantial additional Tariffs on that Country's Exports to the U.S.A., and institute Export restrictions on our Highly Protected Technology and Chips."

Think-tank scholars in Brussels and Washington doubted he would follow through.

Jacob Funk Kirkegaard, a fellow at Brussels economic think tank Bruegel and a nonresident fellow at the Peterson Institute for International Economics, said in a telephone interview Aug. 26, he doesn't "think this is a very credible threat, to be honest."

Given that the U.S. has been retracting export controls on China -- such as the administration's decision to approve exports of Nvidia's H20 chips (see 2508220003) -- Kirkegaard said he had a hard time imagining that he would impose stricter controls on Europe, an ally.

"The EU does, in ASML, have some levers in the other direction," he said, as well as the size and attractiveness of the EU market.

He said if Trump did try to restrict chip sales to the EU, Nvidia CEO "Jensen Huang would have a one-on-one meeting with him again."

Penny Naas, acting senior vice president at the German Marshall Fund of the U.S., said the former administration's AI diffusion rule "was a big deal for Europe and their inability to get these chips, this was a big problem for them."

She also noted that ASML, the world's top maker of advanced manufacturing equipment, is European.

"Europe has cards they can play in this space," she said, but because the EU needs the U.S. to help Ukraine defend itself from Russian aggression, EU politicians "are unwilling to play hardball. If things start to fall apart in a big way, it could be painful for the U.S."

Naas, too, thinks export controls are unlikely to be the way Trump punishes European countries for digital regulation or possible future digital services taxes, saying, "It seems more likely that visas that would be revoked."

Kirkegaard said he wondered if the U.S. would decide to make exports of Patriot missile defense equipment to Germany or Poland a lower priority if either country imposes a DST.

However, even if export controls aren't a serious threat, he thinks the EU may hold its fire and not impose some of the hundreds of millions of euros' fines against U.S. tech champions "in the next six to 12 months."

Kirkegaard, however, said a U.S. Supreme Court ruling against the International Emergency Economic Powers Act tariffs might change the calculus if the situation on the battlefield in Ukraine is also improved.

Asked about Trump's social media posting, EU Commission spokespeople said it does not change their plans to implement the U.S.-EU trade framework, and lower tariffs on U.S. exports.

They dismissed the possibility of future U.S. actions on the Digital Markets Act or Digital Services Act as "speculative."

The EU spokespeople defended the DMA and DSA, saying the idea that they discriminate against U.S. tech firms is false. "It is the sovereign right of the EU and its member states to regulate economic activities on our territory, which are consistent with our democratic values," said Paula Pinho at an Aug. 26 press briefing in Brussels. "This is also why this was not part of our recent agreement with the U.S."