Yet the latest U.S. move may erode some of the very conditions that have enabled earlier successes. Up until now, allies and partners were more or less willing to follow America’s lead, China proved unable to respond forcefully, the private sector adapted well enough, and U.S. technocrats had room to shape key policy details. The next phase of decoupling, however, could be more unpredictable and riskier. The increasing boldness of U.S. unilateral actions, and Washington’s open embrace of a quasi-containment strategy, will draw reactions from many actors. This may finally set in motion forces beyond the control of U.S. national security leaders. Four different groups will define what happens next.
The most important set of players is U.S. allies and partners. They will of course comply with the new export controls, due to the long arm of U.S. law. But Washington can’t afford to settle for begrudging obedience, because export controls are just one part of America’s international technology agenda. The United States sorely needs other nations to coordinate industrial policy, share economic intelligence, harmonize digital regulations, press Beijing on joint concerns, and collectively envision a future economic order. This requires difficult negotiations.
The United States has labored, for example, to launch a “Chip 4” alliance with South Korea, Taiwan and Japan. which together dominate much of the semiconductor industry. But the project has been plagued by internal conflict, and it must now overcome Seoul’s outrage at its companies’ exclusion from a new U.S. electric vehicle tax credit. Washington has also tried to write a human rights code of conduct for export controls alongside Canada, France, the Netherlands, and the United Kingdom, though 10 months have passed with no public results. The U.S.-European Union Trade and Technology Council has been more productive. The Indo-Pacific Economic Framework, less so. Ambitious multilateral efforts, like the U.S. hope of reforming the World Trade Organization, have yet to pick up steam.
America’s latest export controls undermine these dialogues in two ways. By revealing the maximalism of Washington’s campaign against Chinese technology, the move will sharpen debates in allied capitals about whether U.S. aims align with their own political and economic interests. And by flexing unilateral muscles so forcefully, the controls will cast doubt on U.S. willingness to accommodate differing interests. (U.S. officials imposed the new controls while international consultations were still underway, without securing any specific agreements.)
China, of course, will also react. Symmetrical retaliation—for example, blocking U.S. imports of critical minerals or punishing key companies such as Microsoft, Apple, or Tesla—is unlikely. China has much to lose from such actions, and its economy already faces major headwinds. Beijing may instead push back in subtler ways, perhaps slow-rolling regulatory approvals or undermining the recent U.S.-China deal on public company accounting standards. The bigger threat would be Chinese reprisals against U.S. allies and partners—like South Korea, Japan, or Taiwan—that must implement Washington’s controls. China has more leverage against these countries and will want to insert a wedge in America’s economic coalition.
China may also file a WTO complaint. Many U.S. national security officials will roll their eyes at this ponderous and partly broken process, but its long-term consequences should not be dismissed. Much of the edifice of U.S. techno-nationalist policy—from export controls to tariffs to blacklists—runs more or less counter to the WTO’s general bar against country-based discrimination. The United States justifies its actions by expansively interpreting the “national security exception,” but it has wisely avoided testing this argument in formal dispute resolution. A 2019 WTO decision concerning Russia and Ukraine cast real doubt on the U.S. interpretation, both as a general matter and as applied to these new export controls. An adverse ruling would raise concerns among WTO-minded actors such as the European Union and much of the Global South. Moreover, a big U.S. loss could further erode American commitment to the open trading system, ultimately imperiling its viability even as no plan yet exists for what might replace it.
America’s embrace of quasi-containment will come as no surprise to Xi Jinping. But it will certainly help him promote Beijing’s longstanding narrative that a hegemonic United States seeks to stifle China’s normal development. Many countries may be receptive to this argument, judging from the Global South’s lukewarm response to U.S.-led sanctions and trade restrictions against Russia. China can also portray U.S. export controls as stymying progress on shared global challenges. It may cite, for example, the need of Chinese researchers to use supercomputers for vaccine development and climate science. (A recent Biden order defined “advanced clean energy” and “climate adaptation technologies” as “areas affecting U.S. national security” that may warrant restrictive measures.)
The global private sector represents another important set of players. It is well-known that U.S. export controls incentivize firms to escape American jurisdiction by offshoring their operations. Likewise, the foreign direct product rule encourages fuller purging of U.S. technology throughout a global supply chain. This is admittedly hard to pull off. Regardless, private actors will respond to the new export controls’ signal of heightened geopolitical risks. Washington has revealed a clear intent to suppress Chinese technological advances and a willingness to bear growing economic costs to do so. Businesses and investors will realize that decoupling is nowhere near its stopping point. Firms will expect a wide range of follow-on restrictions, not only tougher outbound investment screening and cross-border data rules, but other undefined measures still over the horizon. This will exert a chilling effect on U.S.-China commerce, and perhaps even financial ties, across many sectors.
Some U.S. policymakers may welcome such developments. Figures from Mike Pompeo to Christopher Wray to Mark Warner have exhorted U.S. companies to rethink their China ties in light of intellectual property theft, a possible Taiwan crisis, and other business risks. But Washington could wind up getting more than it bargained for. Many private actors have grown weary of a U.S. policy process that is sometimes opaque, unpredictable, irregular, and even uninformed. In the face of this uncertainty, firms (and academic institutions) may pull back from benign and beneficial areas of U.S.-China engagement. The private sector could ultimately choose to accelerate its own decoupling, which may be broader, faster, and more chaotic than U.S. policymakers have planned for.
U.S. businesses and universities may spurn high-skilled Chinese applicants who pose no real national security risk but would nonetheless face vague and onerous visa screening, “deemed export” controls, or research security requirements. U.S. organizations may slow their adoption of innovative technology (drones, for example) due to the growing risk of bans on Chinese equipment and the dearth of competitive alternatives. U.S. companies may fail to bring new goods to market if China offers the most viable manufacturing site yet there is too much regulatory risk (from possible outbound investment screening, data protection rules, tariffs, and more) to justify long-term investments there. In these and other scenarios, a volatile U.S. policy environment forces private actors to go beyond or move ahead of what policymakers may actually want, harming U.S. interests in the process.
Finally, the new export controls will reverberate within the U.S. political system. Biden probably hopes to fend off Republican attacks that he is weak on China. This may help in the November midterm elections, but in the long run it’s a mug’s game. Anti-China measures have been a one-way ratchet: Each new restriction or sanction simply ups the ante for the next one, empowering hardline voices in the process. There will soon be calls to broaden these export controls and use even more powerful weapons, like the Specially Designated Nationals List, against major Chinese companies.
If Biden is not yet prepared to take these steps, he will find it increasingly hard to explain why. Neither he nor any other U.S. leader has made a serious effort to educate the American people about the costs and risks of decoupling. Rather, popular discourse and political energy overwhelmingly favor the restrictionists. Republicans have made China-bashing central to their brand, and few Democrats are interested in challenging their premises or pointing to possible trade-offs. Many business leaders think differently, but they have lost political sway and they know it. Most choose to keep their head down, offering quiet pleas and technical comments to rulemakings. (The Semiconductor Industry Association said only that it was “assessing the impact of the new export controls,” which were imposed prior to the formal comment period.) In short, not a single prominent political figure has emerged as a major voice of caution on decoupling. So long as that remains true, harsh new controls will only further consolidate the restrictionists’ dominance of mainstream discourse and build momentum for more of the same.
U.S.-led technological decoupling from China has had enormous consequences in just a few short years. It has rewired international relationships, unsettled the global economic order, and transformed technology policymaking and politics in many countries. In this high-stakes game, Washington has been both card player and card dealer, making its own moves while constraining the choices of others. Now the United States has gone all-in—wagering like never before and placing its cards on the table for all to see. The decisive American gamble: to openly block China’s path to become an advanced economic peer, even at significant risk to U.S. and allied interests. Bigger U.S. moves are probably coming in the future. But for now, Washington must wait to see how others play their hands.
This article appears in the Winter 2023 print issue of Foreign Policy magazine. Subscribe now to support our journalism.