Export controls on China have reached a point of no return. A new and expansive package due this month or early next from the U.S. will mean that the semiconductor manufacturing sectors of the two countries are set firmly on a path towards complete decoupling. U.S.-China relations are likely to take a major hit, with Beijing ratcheting up its own controls on critical minerals exports, threatening a major tit-for-tat escalation.
Despite all the rhetoric from Washington about small yards and high fences, and its stated desire to impose controls only on the most advanced semiconductors with potential military end uses, the reality of what the American government is doing is much more complex — with much deeper risks for leading U.S. technology companies.
To add insult to injury, there has been little effort to run the numbers on all of this. In particular, the Biden administration has still not provided any real cost-benefit analysis of its export control measures. Nor has there been any attempt to show whether the government is achieving its national security objectives, nor indeed how it is measuring success on this score. In addition, the disconnect between export controls and industrial policy embodied by the CHIPS Act is becoming ever more apparent.