US-China Tariff Deal Omits Semiconductors Amid AI Control Push

The United States and China have recently implemented tariff reductions valued at approximately $60 billion. This agreement follows an earlier phase one trade deal. The latest tariff adjustments, which began on 13 May, include cuts on a range of products. Agricultural machinery and optical fibre cables are among the items affected. Notably, semiconductors and related manufacturing equipment were not included in these tariff reductions.

This exclusion aligns with ongoing concerns regarding China's technological development, particularly in artificial intelligence. Senate Democrats are pressing for more stringent export controls on advanced chips. Their rationale centres on preventing China from utilising US technology to enhance its AI capabilities. This technological advancement is perceived as a potential threat to US national security.

The initial phase one trade agreement, signed in 2020, involved China committing to purchase an additional $200 billion worth of US goods and services. However, China did not meet these procurement targets. By 2021, China had purchased only 62% of the agreed goods. The current tariff reductions follow a 12-month review process of the phase one deal. This review period concluded on 18 February.

The White House has indicated that the review outcome will determine the future of existing tariffs. US Trade Representative Katherine Tai is leading this comprehensive review. Democrats argue that the existing framework of export controls contains loopholes. These loopholes, they suggest, allow China continued access to critical technology. The focus remains on restricting China's access to the sophisticated semiconductors essential for advanced AI training and deployment. This ongoing debate highlights the intricate balance between economic cooperation and strategic national security interests. Will the current administration implement further, more decisive measures to control technology transfers to China?