The US risks losing its AI advantage if export controls push China into self-reliance and fracture allied technology supply chains. Washington has already layered curbs on chip sales to China and launched the Pax Silica initiative last year to shore up AI supply chains that exclude Beijing, an effort joined by 23 states and the European Union.
Those moves are intended to blunt Beijing’s access to the most advanced chips, chip‑design software and chipmaking equipment, and they do increase costs and dent investor confidence. They will not, however, guarantee long‑term containment. China is investing in domestic substitutes, refining model architecture and squeezing greater efficiency from existing chips while hunting for loopholes around US rules. In June the US closed one such route by curbing Chinese purchases of advanced chips via overseas subsidiaries, but the flow of new workarounds continues.
The approach also depends on sustained allied cooperation, and that partnership is fragile. Advanced chip production rests on a multinational supply chain, combining US design, Dutch and Japanese equipment, and Taiwanese manufacturing. Pushing controls too far, too often, or for too long could prompt allies to seek alternative supply lines rather than absorb the commercial costs Washington demands. Christophe Fouquet, CEO of ASML, has questioned whether restricting sales of the most advanced equipment to China would be effective or would simply spur Beijing to accelerate its own development.
The strategy has also drawn criticism from parts of the US tech sector. Nvidia’s CEO Jensen Huang called the export controls a "failure" that has cost US companies billions, and roughly 200 US startups warned the administration that banning access to advanced Chinese open‑source models would cripple those firms and consolidate market power among a few large players.
China holds leverage of its own. It dominates rare earths processing, accounting for 91 percent of global rare earths separation and refining production, and last year Beijing briefly used export restrictions on heavy rare earths against the US before suspending the ban for a year. Western attempts to replicate China’s rare earths processing face steep practical barriers: Chinese clay deposits and processing know‑how make domestic scaling difficult, and the West lacks comparable technical personnel.
What happens next will depend on policy choices and allied cohesion. If Washington tightens controls while allies seek alternatives, the move could hasten the very Chinese self‑reliance it aims to prevent and raise costs for US firms. If allies maintain coordinated pressure and invest together to fill gaps in chips and rare earths processing, the US could slow Beijing’s progress. The coming phase will test whether export controls function as a strategic brake or accelerate a bifurcated global AI ecosystem.
