Successive US administrations have been chuntering about encircling, outflanking or wrongfooting China’s economy for so long it’s quite startling when one seems to mean it. The Biden administration’s announcement on October 7 of new semiconductor export controls achieved what Donald Trump failed in four years of flailing about with trade policy — it credibly threatened that the US and China, at least their high-tech sectors, will be decoupled by force. The prophesied “weaponised interdependence”, the exploitation of trade and finance linkages to exert geopolitical pressure, now appears to be here.The breadth of the controls was a big advance on Trump’s earlier measures. In particular, the prohibitions on US citizens and green card holders working in China’s semiconductor industry meant hundreds of employees, including from the world-leading Dutch manufacturer ASML, stopping work within days.
Biden’s move is risky, and not just for obvious reasons such as direct retaliation. Beijing could indeed block exports to the US of critical materials like rare earths, or flood the world with cheap basic chips to build market share and encourage dependence. A more fundamental hazard is that the US, acting largely without allies, is stoking a major trade and tech conflict it might not always win. China is already building domestic tech capacity through Xi Jinping’s dual-circulation strategy, a shift towards self-reliance in the Chinese economy.
The US has traditionally calibrated export controls to allow American companies to maintain overseas earnings while keeping China technologically a generation or so behind. If Washington abandons that for strict controls and an all-out tech race, it needs to maximise efficiency in international supply networks — for example, incorporating Europe’s lead in early-stage chip research and machine manufacture.