US Preparing Retaliatory Export Controls Against China, Officials Say
The U.S. is drafting a new set of export controls to use against China if Beijing follows through on its rules to restrict overseas exports that contain certain levels of Chinese-origin material (see 2510090021), senior administration officials said Oct. 15 during a press conference. They also said they're working to coordinate a response with allies.
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“Our documents doing a tariff raise and potentially taking other export controls -- these are drafted or in draft,” U.S. Trade Representative Jamieson Greer said. “So this is quite real, but our expectation is that [China] won't implement this, and that we'll be able to be back to where we were a week ago."
Greer’s comments came days after President Donald Trump threatened to impose new export controls on “any and all critical software," along with an additional 100% tariff, if China doesn’t retract its new export control rules, which are scheduled to take effect Dec. 1 (see 2510100009).
Greer said those new U.S. retaliatory controls are nearly ready to be deployed. But neither he nor Treasury Secretary Scott Bessent gave more details about what those export controls could entail.
In an interview the same day with CNBC, Bessent suggested that the U.S. response will be stronger than China's controls.
“We don't want to have to escalate,” he said. “We have things that are more powerful than the rare earth export controls that the Chinese want to put on.”
Bessent added that he's speaking with his counterparts in the EU, Australia, Canada, India and other parts of Asia about how they can respond to the new Chinese restrictions. “We're going to have a fulsome, group response to this,” he said. “We have lots of levers that we can pull for products that they need that could be equally damaging.”
Although it’s unclear what type of software the U.S. will target, the Bureau of Industry and Security earlier this year informed chip design companies Synopsys, Cadence and Siemens that they could no longer export certain electronic design automation software and technology to China. The Trump administration later reversed those controls after reaching an agreement for Beijing to rein in its export curbs over certain critical minerals (see 2507030009 and 2505300006).
At least one former U.S. official suggested that the administration should impose new chip-related export controls on China if Beijing goes forward with its rare earth restrictions (see 2510100022).
Bessent said the U.S. doesn’t want to “damage” or decouple from the Chinese economy, and it believes Beijing doesn’t want to decouple from the U.S. But he said the China controls are a step in that direction: “This rare earth export control is a sign of decoupling.”
During the press conference, Greer called the controls a “sweeping expansion” of China’s restrictions over rare earth elements and rare earth processing equipment, as well as technologies related to batteries, vehicles, industrial diamonds and superhard materials. Any company exporting certain products anywhere in the world -- if the product contains more than 0.1% of controlled minerals mined or processed in China -- would have to first obtain a Chinese export license, he noted.
“To be clear, this is not just about the United States. These actions, if implemented, would apply to the entire world,” Greer said. “Since many important semiconductors, for example, have these critical minerals, and semiconductors are in nearly everything, this rule gives China control over basically the entire global economy and the technology supply chain.”
He added that the controls will specifically target AI systems and other high-tech products, but they will also affect consumer items such as cars, smartphones and potentially household appliances. “For example, if a smartphone is made in Korea and sold to Australia, then the company would first need to get China's approval, since the phone contains semiconductors which may contain rare earths sourced from China,” Greer said. “Obviously, neither we nor our allies are going to go along with that kind of system.”
Trump “has signaled some of the actions we are taking or may take if the Chinese implement this system of controls on the world,” Greer said.
Bessent said he thinks China is “open” to discussing its new controls, and he believes the two sides will come to an agreement before they're implemented. “I am optimistic that this can be de-escalated,” he said. “Ultimately, we are confident in the strong relationship between President Trump and President Xi [Jinping].”
Bessent also used the press conference to point out that China continues to buy Russian oil and supply Russia with items it needs for its military. The U.S. will soon be “producing photos” showing that Chinese parts “comprise substantial amounts” of drones found on the Russia-Ukraine battlefield, he said.