As Trump returns, the U.S. is set to toughen its line on China

A torrent of executive orders and legislation sets the stage for escalating U.S.-China confrontations, but President Trump might opt for a different approach.

Leaders of the U.S. and China in 2017
Beijing, November 9, 2017: Donald Trump (left) and Xi Jinping at a news conference at the Great Hall of the People. During his first term, President Trump flattered China’s supreme leader on numerous occasions. © Getty Images
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In a nutshell

  • National security-related sectors will remain under federal oversight
  • The Trump team is readying more trade and investment restrictions on China
  • The U.S. Congress may unleash a slew of bipartisan laws targeting China
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In the United States, President-elect Donald Trump, who will be inaugurated later today, has announced plans to establish an administration that will prioritize reducing federal rulemaking. This strategy includes diminishing oversight in key domestic economic sectors and advanced technologies such as artificial intelligence (AI), cybersecurity and data privacy. However, this approach may face challenges when these areas intersect with national security concerns, particularly regarding perceived threats from China.

Federal-level regulation to focus on countering China 

The potential vulnerabilities in American national security across various sensitive sectors are highlighted in President Trump’s 2018 National Defense Strategy. This strategy identifies China, alongside Russia, as a central challenge to U.S. prosperity and security, marking a significant shift in how these nations are perceived within the context of global power dynamics. 

The strategy describes an increasingly complex global security environment characterized by “rapid technological change and challenges from adversaries in every operating domain.” It identifies the Chinese government as pursuing “a military modernization program that seeks Indo-Pacific regional hegemony in the near term and aims to displace the United States to achieve global pre-eminence in the future.”

With China positioned at the center of national security considerations, along with its implications for key domestic development sectors, this approach is expected to be further reinforced by Mr. Trump in his second administration. He plans to intensify federal oversight of U.S. companies leading in the development of advanced technologies. The strategy will specifically target Chinese entities attempting to steal U.S. corporate technology or disrupt national security.

From a data privacy perspective, U.S. companies that transfer large amounts of data to “countries of concern,” notably China, will face increased federal scrutiny.

Transitioning Biden’s restrictive AI policy on China to Trump

Mr. Trump’s predecessor, President Joe Biden, has prioritized limiting China’s AI capabilities as a crucial policy goal. Recently, the U.S. Treasury issued final regulations that limit U.S. investments in China concerning certain AI systems, semiconductors and quantum computing technologies.

Under Mr. Trump, AI will be the primary advanced technology targeted for investment restrictions. This shift will likely involve moving away from President Biden’s risk mitigation strategy in AI development toward a greater emphasis on rivalry with China. Even so, certain national security policy features are likely to be carried over from one administration to the next.

Under a Trump administration, the practical focus will likely be on what foreign adversaries could do with such data if they applied AI capabilities.

For example, several measures arising from President Biden’s executive order on advanced technologies in October 2023 were introduced to determine how AI capabilities are protected in the U.S. Other measures, yet to be enforced, will seek to restrict China’s advancement of its own capabilities in developing this technology. Each of these policy measures is likely to be adopted by the incoming Trump administration.

Technology restrictions on China to intensify

Investment restrictions on China have bipartisan support on Capitol Hill and are expected to become even more pronounced during a second Trump administration. Earlier in 2024, the U.S. Commerce Department issued “know your customer” requirements for cloud service providers, mandating that they report to authorities whenever a foreign entity uses a cloud service to develop an AI model that could enable cyber activities.

While this measure is designed to protect cloud-based infrastructure provided by U.S. companies, it also monitors foreign nations’ abilities to acquire U.S.-developed foundational technology and develop their own systems based on that technology.

New rules are also being implemented regarding the collection and sharing of data about U.S. persons and critical infrastructure. Under a Trump administration, the practical focus will likely be on what foreign adversaries could do with such data if they applied AI capabilities.

Moreover, the U.S. Commerce Department has launched rules that limit the sale of vehicle systems capable of collecting information about U.S. critical infrastructure. Such information is of interest to foreign adversaries, and countries such as China manufacture such systems. Many of these rules are ongoing, and there is a high likelihood that the Trump administration will continue to enable them.

This intersection of advanced technologies with national security is one where a significant degree of consistency can be expected from the outgoing administration to the incoming one.

Export controls and investment restrictions

The U.S. uses export controls as key tools to deny China access to advanced technologies. The process began with the Export Control Reform Act in August 2018, which regulated the export of dual-use technologies, primarily targeting China. The Biden administration further tightened export controls on advanced computing and semiconductor manufacturing items from October 2022, again focusing mainly on China.

The U.S. has also been applying export controls with significant extraterritorial effect, substantially influencing the development of international supply chains, the location of manufacturing facilities and the ability of foreign entities to collaborate with global counterparts.

For example, the U.S. recently ordered Taiwan Semiconductor Manufacturing Corporation, the world’s leading advanced chip maker, to stop selling its chips to Chinese customers – a directive that the company has indicated it will comply with. This restriction aims to slow China’s AI development and is a key area where decoupling between China and the U.S. is in full swing.

Another policy taking shape involves foreign investment restrictions administered by the Committee on Foreign Investment in the U.S. (CFIUS). Under the first Trump administration, the Foreign Investment Risk Review Modernization Act, enacted in August 2018, strengthened and modernized the committee by expanding its coverage of inward investment transactions to include national security reviews. Its remit has continued to expand, and the committee now covers merger and acquisition activity.

Read more from Bob Savic

In particular, Chinese ownership of U.S. technology companies has been subject to scrutiny, sometimes resulting in Chinese stakes in tech firms being blocked or ordered to divest by authorities. Under the new Trump administration, CFIUS is likely to gain more extraordinary powers to block Chinese investments across U.S. industries.

President Biden also restricted outward direct investment into China in specific areas of technology in August 2023.

Elon Musk promotes a new Tesla model in China in 2020
Elon Musk’s (center) business interests in China, where Tesla manufactures half its vehicles and earns a third of its revenue, raise speculation that President Trump may in fact pursue a truce with Beijing. © Getty Images

Bipartisan congressional anti-China laws

Aside from the White House, the U.S. Congress plays a significant role in setting national security measures concerning China. Consequently, where advanced technologies intersect with national security, a notable escalation in oversight can be expected. This will include not only tighter enforcement actions but also congressional inquiries and hearings where both U.S. and foreign companies could face intense scrutiny.

The strong bipartisan support for this wide range of legislation indicates that Congress is committed to intensifying U.S.-China rivalry.

Prior to the last U.S. national election, Congress passed several pieces of legislation targeting threats posed by China’s ruling communist party during what is now referred to as “China Week.”

Several bills currently before the Senate aim to address risks arising from China’s economic, ideological, technological and military challenges to the U.S. According to Chairman John Moolenaar of the Congressional Select Committee on the Chinese Communist Party: 

Congress will take action to secure our supply chains. From electric vehicle batteries to health care to critical infrastructure, the Chinese Communist Party wants to make us dependent on companies subject to its direction. Legislation on the floor this week will take steps to protect taxpayer dollars from being used by the CCP to advance its leverage over our critical supply chains.

The strong bipartisan support for this wide range of legislation indicates that Congress is committed to intensifying U.S.-China rivalry.

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Scenarios

More likely: The U.S. will enact laws to significantly decouple from China

U.S. economic decoupling from China has been gaining momentum since the first Trump administration (2017-2020) and has been further amplified under President Biden. In 2025, with a new administration composed of President-elect Trump’s numerous China-hawkish cabinet appointees, it is reasonable to assume that the incoming administration will adopt an even more aggressive agenda.

In parallel, the new Republican-dominated Congress will also play an increasingly influential role in expanding a program of new laws aimed at further decoupling from China. A powerful symbolic precursor of the stance it will take in coming years was the passage through Congress, in mid-November 2024, of a law reversing decades of strengthening U.S. trade relations with China.

This came in the form of the Restoring Trade Fairness Act, which intends to suspend U.S. permanent normal trade relations with Beijing. This status was granted to China in 2000, allowing for U.S. recognition of China’s World Trade Organization accession and its removal from the annual Senate vote on maintaining Most-Favored Nation status.

This proposed law supports companion legislation called the Neither Permanent Nor Normal Trade Relations Act, initiated in the Senate in September 2024 by Senator Marco Rubio.

Mr. Rubio, a long-time critic of China, has become Mr. Trump’s pick for U.S. Secretary of State and will likely reshape American foreign policy by aggressively pushing back against China’s continued economic, diplomatic and military rise.

Once confirmed by the Senate, Senator Rubio will be the first sitting U.S. Secretary of State to have been sanctioned by Beijing. He was first sanctioned in 2020 for introducing measures against senior Chinese officials over their reported human rights abuses of ethnic minorities, particularly the Muslim Uighurs in Xinjiang province. He faced a second sanction for advocating U.S. measures against Chinese officials in response to the pro-democracy protests in Hong Kong.

Senator Rubio has openly advocated for a more restrictive policy toward China, describing it as “the largest, most advanced adversary America has ever faced.” Many of his positions have gained traction in both the Republican and Democratic parties, including his call for an industrial policy aimed at outcompeting China’s state-directed economy.

Given Senator Rubio’s background and the views of other key cabinet appointees, such as Mike Waltz as national security adviser and Elise Stefanik as ambassador to the United Nations, all of whom align with the rising bipartisan consensus treating Beijing as America’s principal rival, it is clear that the incoming administration intends to substantially expand measures aimed at significant U.S. economic and political separation from China.

Less likely: Trump’s transactional approach will limit decoupling from China

The exact nature of the president-elect’s China policy is not set in stone. Despite his often heavy-handed anti-China rhetoric and surprise measures imposing tariffs on over $300 billion of Chinese imports during his first term, Mr. Trump has pursued an exchange-based approach regarding trade and foreign policy.

In fact, the greatest obstacle for the Trump cabinet in pursuing rivalry with China might be the president himself, given his tendency for surprising shifts, deal-making and transactionalism.

President-elect Trump has a penchant for admiring strongman leaders, including Chinese President Xi Jinping, whom he has flattered on numerous occasions and referred to as his “good friend” during his first term in office. Such declarations have occasionally undermined the more principled approaches of his previous subordinates, who advocated for expansive export controls and stricter human rights-related laws against China.

Despite the contentious nature of their relationship, Trump has expressed a desire to improve ties with President Xi. He invited the Chinese leader to his inauguration, a move that surprised many given their past interactions and the tense U.S.-China relationship. That gesture can be seen as an effort to foster open communication with leaders from both allied and rival nations.

At this stage, what seems most evident is Mr. Trump’s hardline stance on China trade policy, which includes a double threat to impose 60 percent tariffs on Chinese imports and an additional 10 percent on top of that. However, this stance may either represent a negotiating strategy aimed at convincing Beijing to change its behavior or a signal of his firm intent to disentangle from China.

By and large, President-elect Trump has focused on disputing sectoral issues regarding trade, technology and intellectual property with China, rather than pursuing a one-size-fits-all international relations ideology, such as President Biden’s “democracy vs. autocracy” mantra. This approach may reflect Mr. Trump’s give-and-take predisposition and his openness to pursuing an economic deal with Beijing that favors America.

From a more extreme perspective, Mr. Trump may even tolerate an expanding China in the Indo-Pacific and elsewhere in the world, as long as it provides the U.S. with a financial or trade advantage. For example, this could involve direct monetary compensation from Taiwan in exchange for American defense support. In other words, anything goes as long as it contributes to Mr. Trump’s “bottom line.”

In this regard, perhaps the biggest transactional elephant in the room is President-elect Trump’s close relationship with Elon Musk. The multi-billionaire maintains considerable investments in China, where Tesla manufactures half of its vehicles and derives one-third of its global revenues. Mr. Trump’s ongoing relations with Mr. Musk, despite the latter’s growing dependency on China, may affirm his transactional outlook and limit any wholesale decoupling from China, contrasting with his politically principled team of China hawks and the anti-China bipartisan Congress.

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