Former NSC Official Predicts 'Aggressive' Export Controls, Outbound Investment Progress This Year
The first few weeks of the new Trump administration have shown that there appears to be a “fair amount of continuity” from the Biden administration on certain China trade policies, including around export controls and outbound investment restrictions, a former Biden National Security Council official said.
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Peter Harrell, the White House’s former senior director for international economics and competitiveness, specifically noted that the new Trump-led government hasn’t yet taken any public steps to reverse Biden’s last-minute artificial intelligence diffusion rule, which introduced new worldwide export controls on advanced AI chips (see 2501130026). That’s despite “all the consternation there was” about the new controls, Harrell said, referencing the criticism the Commerce Department received from several major chip companies and technology trade groups (see 2501060015 and 2501080034).
It’s “notable” that the new administration “has kept that in place, at least so far,” Harrell, speaking during a conference this week hosted by the Washington International Trade Association, said of the export controls. “And while [the Trump administration] could change it and amend it a bit, I think you are going to continue to see an aggressive focus on export controls.”
Harrell also noted that the new administration appears to be gearing up to build on the outbound investment restrictions introduced by Biden, which introduced prohibitions, and in some cases notification requirements, for U.S. investments in China’s semiconductor, AI and quantum industries. He pointed out that Trump’s day-one trade memorandum ordered U.S. agencies to consider expanding those restrictions (see 2501210023).
Both Congress and Trump administration officials appear to be moving toward broadening those restrictions (see 2502070023) to “maybe cover some additional defense-related sectors, maybe some additional high-tech sectors,” Harrell said. The U.S. may also look to more closely scrutinize passive investments, such as publicly traded securities, including by adding on to the Treasury Department’s Chinese Military-Industrial Complex Companies List, Harrell said, which lists firms that are subject to a U.S. investment ban.
Biden largely kept that list "static," he said, “and I think there's going to be a really interesting question for the Trump administration if they get back to growing that list.” Harrell said the administration could expand that list by harmonizing it with the Commerce Department’s Entity List, which lists entities subject to strict export license requirements but that aren’t necessarily subject to investment restrictions.
Researchers have proposed U.S. policymakers study whether to harmonize U.S. investment restrictions with the Entity List (see 2302030023).
Harrell said he’s expecting the Trump administration to make some decisions about how it wants to approach outbound investment restrictions before the end of this year.
“Obviously, the Trump team is dealing with a lot of issues right now in the foreign policy space and geoeconomic space,” he said. “But I do think by late this year we're going to see the Trump administration get serious about amending and expanding the outbound investment regime, and it's really just going to be a question of how far.”
Although Trump appears to be leaning into many of the trade tools that Biden used against China, Harrell noted that Trump is “obviously focusing more on the use of tariffs.” And even though many of Trump’s top Cabinet officials and advisers have a “very control-oriented and hawkish approach” to China, such as Secretary of State Marco Rubio and National Security Adviser Mike Waltz, Harrell pointed out that Trump may be more willing than Biden to negotiate the potential removal of trade controls as part of some broader deal with China.
“Trump does love a deal, right? And that's just the reality of dealing with Donald Trump,” Harrell said. “With Trump, you can't rule out some unexpected curveballs that might come into the relationship, and I think we all have to be scenario planning what those could look like, even if our base case scenario is more tariffs, ratchet up some export controls and maybe expand the investment restrictions.”