How the Trump administration wants to limit China’s AI

• The US Department of Commerce (DOC) formally rescinded the Biden administration’s ‘Artificial Intelligence Diffusion Rule’, marking a strategic shift in the US’s approach to the tech war.

• The rule, introduced under former President Joe Biden, aimed to manage the global proliferation of advanced AI chips and capabilities. However, it established new restrictions on exporting U.S.-made AI chips.

• The Trump administration has swept this tiered system aside, with plans for a “replacement rule in the future” focusing on direct negotiations with countries.

• The DOC issued immediate, pointed guidance, warning against using Huawei’s Ascend AI chips anywhere globally, cautioning against using U.S. AI chips to train AI models within China, and recommending fortifying chip supply chains against diversion tactics.

• The shift in AI export control is more a change in battlefield tactics than a retreat from strategic objectives. Both administrations share the core goal of cementing U.S. dominance in AI and preventing China from leveraging advanced technology to surpass U.S. military and economic power.

• The economic front in the AI war is intrinsically linked to the ongoing tariff war, with U.S. tariffs on Chinese goods and retaliatory Chinese tariffs on U.S. products directly impacting the tech sector by increasing the cost of components, servers, and finished goods essential for AI development and infrastructure.

• The policy shift creates a dual pressure point for the tech industry: restricted access to and movement of AI technology, compounded by the increased financial burden of tariffs.

• Tech companies are navigating a minefield where both AI know-how and the hardware it runs on are subject to intense geopolitical maneuvering and economic warfare.

• The integrated battlefront of AI controls and tariffs signals continued, if not amplified, turbulence for tech companies and their global supply chains.

• In the near term, adapting to ambiguity will be important as geopolitics moves from a defined set of rules to a future based on direct negotiations.

• In the long term, the intertwined forces of AI export controls and tariffs will likely compel companies to de-risk and diversify their supply chains.