One of the lasting legacies of President Joe Biden’s approach to China will be the extent to which he made semiconductors a central focus in the U.S.-China relationship. Biden reduced the emphasis on tariffs and a trade war left the previous Trump administration and increased the attention on a tech war, which semiconductors were at the heart of.
Now, in the waning days of his administration, Biden has launched two significant actions focused on semiconductors and may be about to start a third. However, the incoming Trump administration will have the final say on these issues, providing early indications of how the new officials may refine Biden’s strategy.
The first was opening a Section 301 investigation by the Office of the U.S. Trade Representative into China’s support for producing mature semiconductors, sometimes referred to as foundational chips. They are not on the cutting edge of semiconductor technology but are widely used in everyday consumer devices. Depending on the findings from the investigation, there is a range of possible penalties, including tariffs, from which the Trump administration can choose. Trump’s U.S. Trade Representative nominee, Jamieson Greer, has not commented publicly on the investigation. However, it would be unsurprising if lawmakers pressed him on the issue as part of his confirmation process.
The second action is a new set of limits that impose restrictions on selling advanced AI semiconductors by companies like Nvidia. The rules set three tiers of countries, with export caps set by what tier a country falls in. The regulations aim to minimize any possible third country backdoor maneuvers that China could use to receive chips that it cannot otherwise access. However, the rules do not address the leasing of server space in these third-party countries. Despite some exemptions, including for gaming semiconductors, industry representatives have continued their ardent opposition to the new rules. Ned Finkle, Nvidia’s vice president of government affairs, described the regulations in a company blog as “unprecedented and misguided” and said the policy “threatens to derail innovation and economic growth worldwide.”
While these limits on the export of advanced AI chips were established through an interim final rule, they will not take effect for one year and carry a 120-day comment period. This time allows the Trump administration to modify the regulations if it sees fit. If Trump’s officials make no changes, the rules will come into force in January 2026 as written. However, after the comment period, the Trump administration will have a chance to make changes, which would then likely be announced in the summer or fall of 2025.
Changes to alleviate some of the industry’s concerns are not guaranteed under the Trump administration, which is expected to take a relatively hawkish approach toward China. The result could be that the rules are softened by changing the export cap, which countries are assigned to what tier, or what transactions are exempted under the regulations. Adjustments along any of these axes would likely benefit the industry, but given the Trump administration’s expected stance on China, a complete rollback of the rules may be a bridge too far. Biden’s national security advisor, Jake Sullivan, said in an interview with Bloomberg News that he expects the rules to survive the transition, even if there are some tweaks.
Collectively, how the Trump administration decides to handle these items left by the Biden administration for the incoming officials to finish will provide some early markers of the Trump team’s emphasis on semiconductors and its approach to China. Trump is expected to increase the importance of tariffs in his China strategy relative to Biden’s, but how exactly that will balance with the tech war that Biden opened is uncertain. There will likely be China hawks pushing to continue, and potentially extend, the Biden administration’s efforts, but where Trump falls on these issues and how much agreement there is in that aggressive approach remains to be seen.
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