The need for the United States to confront China’s rise as a military, economic, and technological competitor has been one of the enduring areas of bipartisan agreement in Washington dating back to the Obama presidency. However, a growing divide exists about how best to balance economic security with commercial opportunity, especially with leading-edge technologies.
To this point, when President Biden announced an AI Diffusion rule mere days before the end of his term, the company that would be most impacted, Nvidia, issued an unusually sharp response. It swiftly declared the new rule, designed to cap access to advanced semiconductor chips and AI model weights for all but a few allied countries, as misguided and claimed it would undermine U.S. competitiveness and innovation.
The strongly worded statement fully exposed a long-simmering tension between proponents of building security through technological dependence versus advocates of restricting technological access.
On one side of that debate is the argument that restrictions, when taken too far, undercut the revenue that U.S. companies rely on for advanced R&D and incentivize an adversary to develop indigenous or alternative technological solutions, ultimately undermining the long-run effectiveness of export controls.
On the other is the belief that persistent access to n-1 technologies shrinks an adversary’s learning curve and allows them to reverse engineer products for their own indigenization efforts. Proponents of a more restrictive approach also argue that where technologies are particularly singular, or where U.S. companies possess a particularly large lead, well-administered export controls can effectively render that gap insurmountable.
The AI Diffusion rule, introduced by President Biden and subsequently rescinded by President Trump, is emblematic of this debate and representative of the sea change in the U.S. approach to competition with China between these two presidencies.
While this shift is best understood by examining each administration’s respective actions involving semiconductors and AI, the implications extend much further and foreshadow increasing government intervention across a wider range of commercial activity.
For impacted businesses, the central challenge becomes making both a strategic case that permitting their continued commercial activity strengthens U.S. economic security, and a transactional one that doing so will deliver measurable U.S. economic gains.
Before examining the current state, let’s consider how the Biden administration pursued safeguarding U.S. technology and strengthening economic security.
It began with a fundamental reimagining of the objective of export controls, from maintaining a relative technological advantage to essentially freezing in place adversaries’ access to certain technologies in order to grow the U.S. absolute advantage.
Nonetheless, President Biden sought to prevent a more aggressive posture on export controls from spilling over into the broader trading relationship with China. Biden officials were careful to emphasize that their policies were meant to “de-risk” rather than “decouple” from the Chinese economy, though PRC officials viewed the carefully constructed verbiage as a distinction without a difference.
President Biden’s technology protection strategy then further evolved into what became known as the “small yard, high fence” doctrine.
This approach applied significant, comprehensive, and consistent restrictions to a narrow set of technologies deemed most vital to U.S. national security, while largely preserving the status quo for the remainder of U.S.-China commercial ties.
If a technology ended up inside this proverbial yard, as advanced semiconductors, quantum computing, and AI did, it became potentially subject to numerous enhanced controls including expanded entity lists, investment restrictions, and extraterritorial application (e.g. the Foreign Direct Product Rule).
To continue with the example of semiconductors and AI, President Biden combined aggressive export and investment controls with novel policies such as the CHIPS Act national security guardrails and the aforementioned AI Diffusion into a holistic dragnet designed to deny the PRC both direct and backdoor access to the chips, machinery, infrastructure, capital, and know-how required to train and deploy frontier AI models.
Taken together, these policies demonstrated the Biden administration’s clear view that the commercial visibility and potential leverage afforded by China’s continued dependence on American AI technology was outweighed by the risks of that technology being leveraged against U.S. security interests. The result was a dramatically shrunken market for U.S. advanced tech sales not just in China, but throughout much of the world.
From the start of his second term, President Trump has taken a fundamentally different approach to competition with China.
This Brookings Institution analysis summarizes the difference well, noting that “as exemplified by the [Trump administration’s] approach to China, rather than treating economic security as a problem of managing exposure within an otherwise market-oriented system, the administration defines security in terms of economic strength, industrial capacity, and the ability to exercise leverage.” It adds that “while resilience and risk mitigation figure into this framework, they are not the central objectives.”
This reorientation towards market dominance is evidenced by the breadth of trade-related actions that President Trump has taken in just his first year in office, from broad-based reciprocal tariffs to trade investigations spanning shipbuilding, digital payments, automobiles, pharmaceuticals, copper, lumber, commercial aircraft, critical minerals, semiconductors, and more.
On semiconductors and AI specifically, President Trump has pursued a dual-track approach.
His administration has continued and occasionally strengthened the Biden-era restrictions, which is unsurprising given its skepticism towards trade with China. It increased the number of companies on BIS’s Entity List, expanded AI export controls, and even initially banned the sale into China of Nvidia H20 chips, which were specifically designed to comply with President Biden’s export controls.
Yet President Trump has also placed a heavy emphasis on commercial dealmaking and market access in support of his stated goals around economic strength. He has struck controversial AI partnerships with Saudi Arabia and the United Arab Emirates and launched a Pax Silica initiative to power semiconductor supply chains.
Where these two approaches conflict, the more commercially favorable policy typically prevails. Notable examples include BIS later backtracking on its license requirement for H20 chips, reportedly to avoid disrupting trade agreement negotiations with China, and BIS recently revising its semiconductor licensing policy to allow Nvidia to sell its second-most powerful AI chip, the H200, to approved customers in China.
In advocating for Chinese market access, Nvidia’s CEO Jensen Huang repeatedly argued that export controls encourage China’s technology indigenization efforts and threaten U.S. global leadership on AI. Combined with the recent steps to loosen semiconductor export restrictions, the technological dependence line of argument appears to resonate with Trump administration officials.
So how to make sense of the mixed signals coming out of the current administration’s approach to economic security, specifically around export controls?
Applying a framework analysis is inherently limited given President Trump’s fluid decision making and preference for generating uncertainty as a negotiating tactic.
He is also commercially minded and highly transactional, meaning that his trade-related actions function less as a unified policy and more as a means to an end, with the end being an agreement that is quantifiable and accretive to the United States in terms of dollars, jobs, or market share.
The pharmaceutical sector illustrates how this pattern extends beyond tech. As with semiconductors, the Trump administration has invoked national security concerns—in this case through Section 232 investigations into pharmaceutical imports—while simultaneously pressing drugmakers for domestic manufacturing commitments.
Such an unpredictable regulatory environment creates both risk and opportunities.
The risks are obvious. There are few, if any, sectors that should consider themselves insulated from the reach or impact of current U.S. trade policy. Unrelated issues can quickly become cross-linked as a means of leverage, as was the case when President Trump threatened to impose tariffs over Greenland. Customers may switch to non-U.S. suppliers for greater business certainty.
The opportunity exists in a greater ability for business stakeholders to shape federal policy in their favor. As the Nvidia example demonstrates, effective engagement can secure reversals of or exemptions from restrictions and position U.S. government policy itself as a competitive advantage.
To accomplish this, CEOs, attorneys, lobbyists, and government affairs specialists alike must be prepared to explain their request in both the strategic context of how greater U.S.-China commercial activity enhances U.S. economic security, and in the transactional context of how the ask will materially improve U.S. economic standing.
It bears noting, however, that the ability to shape policy in this way has so far accrued primarily to large, politically connected companies with direct White House access. For those without that access, the most effective hedge remains providing these narratives proactively through trade associations, industry coalitions, and the BIS public comment process, before a restriction lands rather than after.
The shift from the Biden administration's targeted technological restrictions to the Trump administration's transactional, deal-driven approach represents a fundamental reorientation in how the United States confronts strategic competition with China.
While this creates significant uncertainty for businesses navigating export controls and trade policy, it also opens new avenues for stakeholders to influence policy outcomes by demonstrating how their market access requests serve U.S. economic interests.
Companies that can articulate their case by showing how commercial engagement enhances American competitiveness rather than undermining security may find themselves better positioned to navigate an era where trade restrictions have become both more expansive and more negotiable.
Drew Dushkes is the Founder and Principal Consultant at Dushkes International. He was previously a Senior Advisor in the CHIPS for America Program at the U.S. Department of Commerce.
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