Reining in the Export Control Arms Race

Export Controls on the Frontline of the Trade War

Export controls are a critical instrument of U.S. national security policy, designed to prevent adversaries from acquiring technologies that could enhance military capabilities or undermine global stability. Historically, these measures were narrowly focused and predominantly multilateral, coordinated through regimes like the Wassenaar Arrangement. However, in recent years and amid escalating U.S.-China tensions, export controls have evolved into a broader tool of economic statecraft. They are increasingly deployed unilaterally and even negotiated as part of trade deals.

This shift places export controls at the forefront of an ongoing trade war, risking their long-term credibility and effectiveness. Moreover, as China mobilizes its own export control regime, the world is in danger of an export control and economic statecraft arms race that, if unchecked, could severely undermine our security and economic prosperity.

Mission Creep: From Limited and Multilateral to Wide-Ranging Solo Endeavors

The Department of Commerce’s authority to restrict the transfer of goods and technology derives from the Export Control Reform Act of 2018 (ECRA). This statute and its predecessors limit the imposition of export controls to genuine national security concerns, such as controlling items with military applications or specific foreign policy objectives, including human rights protections.

Historically, these controls were rarely unilateral; instead, they relied on multilateral coordination through mechanisms like the Wassenaar Arrangement, established in 1996 as a successor to Cold War–era regimes. Wassenaar and similar fora maintain consensus-based lists of controlled dual-use items across members, creating a level playing field and reducing the risk of circumvention.

Critically, export controls were never treated as bargaining chips. As a national security instrument, adjustments occurred only in response to changes in an adversary’s behavior, technological developments that mitigated risks, or the emergence of new threats—not as leverage in negotiations. 

The paradigm began to shift under the Biden administration, which viewed export controls as a powerful, underutilized tool to slow China’s development of advanced AI. In October 2022, the Bureau of Industry and Security (BIS) imposed unilateral controls on high-performance computing chips, advanced semiconductors, and related manufacturing equipment destined for China. These measures, which were refined and expanded in 2023 and 2024, use foreign direct product (FDP) rules to make foreign-produced items subject to U.S. jurisdiction when their production involves certain U.S. technology, software, or equipment. For example, BIS asserted regulatory authority over Dutch lithography equipment (from the firm ASML) until the Dutch government implemented comparable controls.

Policymakers framed these actions strictly as national security necessities to curb China’s military modernization and supercomputing advances, stating that “these items and capabilities are used by the PRC to produce advanced military systems including weapons of mass destruction; improve the speed and accuracy of its military decision making, planning, and logistics, as well as of its autonomous military systems; and commit human rights abuses.” Beijing predictably viewed them as economic coercion aimed at hobbling China’s technological rise rather than addressing imminent military threats. Critics in the United States and among allies, by contrast, were worried that these measures stretched the definition of national security to a degree that would put U.S. policy on a slippery slope where the “small yard” would inevitably expand as a result of China’s changing technological capabilities, the widening of goals, or through a tit-for-tat dynamic indefinitely.

The Biden-era controls also stand out for the sheer number of Chinese companies that were affected. For context, an average of 10 Chinese companies per year were added to the Entity List from 2014–2018, and an average of 50 per year from 2019–2022. Chinese company additions jumped to 154 in 2023 and to 264 in 2024. This doesn’t include the Pentagon’s list of “Chinese Military Companies” (the “H1260” list) or the Department of the Treasury’s “Non-SDN Chinese-Military Industrial Complex Companies List,” each with more than 100 Chinese companies. Although the United States added many of these companies for circumventing export controls to Russia, in practice the government began to signal that it increasingly viewed broad swaths of Chinese industry as untrustworthy.

The Technology and Export-Control Arms Races

China has long been on a mission to pursue “indigenous innovation” and reduce its dependence on American technology. The increased use of export controls and other restrictions, including tariffs and investment barriers, led China to significantly accelerate these initiatives, and the reduction in availability of U.S. technology incentivized Chinese research organizations and companies to invest in substitutes at an unprecedented pace. In practice, the controls helped align various actors within China that were previously not as fully committed to reducing reliance on U.S. technology.

Equally important, China has also studiously developed its own export control regime. It adopted an Export Control Law in 2020 modeled heavily on the U.S. system, creating lists of controlled items and restricted entities. In 2023, it began creating licensing regimes for specific raw materials, including gallium, germanium, graphite, tungsten, and tellurium. All of this was a preface to the escalatory spiral that has emerged over the last year. In reaction to the Trump administration’s imposition of unprecedentedly high tariffs on April 2, 2025, also known as “Liberation Day,” the Chinese government responded by adding multiple medium-to-heavy rare earths to its control list. The measure immediately slowed the export of rare earths. In mid-May, following the Department of Commerce’s clarification of rules around the Huawei Ascend chip, China stopped rare earth exports entirely. Importantly, the Chinese controls affected exports to all countries, not just the United States, triggering global concerns.

With China having explicitly weaponized its export-control regime to push back against American tariffs and export controls, the Trump administration followed suit, using “Is Informed Letters” (typically narrow stop-gap notifications of a license requirement) to impose export controls on electronic design automation (EDA) software used for semiconductor design, and ethane, a feedstock used to make plastics, a product with no clear national security relevance. Export licenses for machine tools and aviation equipment that had been issued previously were also suspended.

The measures adopted by both sides were outside the scope of how export controls should be used. Instead, they were merely bargaining chips intended to impose costs and gain leverage on the other side (see Figure 1). In June, the two sides agreed to deescalate, with China committing to issuing licenses for rare earths in exchange for the U.S. lifting its new controls, allowing licensed exports of Nvidia H20 GPUs, and at least implicitly committing to withholding issuing new export controls on China.

Three months later, though, tensions flared again; in late September 2025, the U.S. issued an “affiliates” rule, expanding coverage of U.S. export controls to subsidiaries of Chinese companies already listed. In response, two weeks later, China rolled out a comprehensive export-control regime on rare earths. Consistent with the FDP rule, China’s regime would give it extraterritorial authority to regulate exports of items from other countries that included China-origin rare earths.

As in the summer, the two sides again quickly agreed to a ceasefire, with the U.S. suspending its affiliate rule and China suspending its de minimis, FDP rule, and 50 percent rule for one year. Yet, this ceasefire does not solve the underlying issues, which are likely to flare up again, leading to renewed escalation. It also leaves unanswered questions about how the two countries will manage the bilateral relationship after the agreed ceasefire ends.