The escalating technological and economic rivalry between the United States and China has prompted a series of policy measures to safeguard U.S. economic security. From export controls and investment restrictions to industrial incentives and tariffs, these actions target critical sectors such as semiconductors, electric vehicles, and artificial intelligence, seeking to curtail China’s technological advancements and reduce dependence on Chinese supply chains. However, as U.S. policymakers expand these measures, the outcomes have been mixed, yielding success and unintended consequences, including accelerated innovation in China. This article examines the implications of these strategies, highlights the trade-offs they entail, and underscores the need for a balanced, multilateral approach to address the challenges of this complex economic competition.
In late September, the Biden administration issued a draft rule that would ban Chinese-connected and autonomous vehicles and their components from the U.S. market. This is one of the latest of many steps that U.S. policymakers have taken to protect the United States’ economic security. Under the first Trump administration, Washington placed restrictions on the telecom companies ZTE and Huawei. President Joe Biden has maintained many of Trump’s policies toward China and advanced new ones, including initiating broad export controls in late 2022 on advanced semiconductors and semiconductor equipment.
As the incoming Trump administration appears ready to accelerate and expand these restrictions further still, it’s worth considering the track record of these policies—and taking stock of the tradeoffs that they entail.
Washington’s array of tools is highly expansive: export controls, tariffs, product bans, inbound and outbound investment screening, constraints on data flows, incentives to shift supply chains, limits on scholarly exchange and research collaboration, industrial policy expenditures, and buy-America incentives. The goals of these measures are equally diverse: slow China’s progress in the most advanced technologies that have dual-use potential, reduce overdependence on China as a source of inputs and as a market for Western goods, deny China access to sensitive data, protect critical infrastructure, push back against economic coercion, protect the United States’ industrial competitiveness, and boost its manufacturing employment.
Beijing’s shift toward a more expansive and assertive form of mercantilist techno-nationalism poses genuine risks to the prosperity and economic security of the United States and others. Something must be done, to be sure, but Washington’s increasingly restrictive policies have yielded highly mixed results. Take the goal of slowing China’s technological progress at the cutting edge and maintaining the United States’ relative technological advantage. In pursuit of this objective, Washington has seen progress in some areas, such as slowing China’s semiconductor sector, but witnessed even more rapid Chinese success in others, such as in electric vehicles and batteries. There are inherent tensions between Washington’s various economic security goals, with progress in some inevitably slowing progress in others. Additionally, U.S. policymakers have not adequately considered how China and others would adapt to U.S. restrictions.
Credits: Foreign Affairs
