In Fencing China Out, Is Washington Fencing Itself In? – OpEd

Dr. Imran Khalid

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As Washington doubles down on its semiconductor embargoes, a troubling paradox emerges: in trying to stymie China’s technological advances, the United States might just be fencing itself in. Each successive restriction aims to choke off China’s progress, specifically in artificial intelligence and high-performance chips. Yet these measures risk isolating the United States from global tech supply chains, harming its own industry and allies.

Take the new U.S. Treasury rule, effective January 2025, which tightens restrictions on American investments in Chinese semiconductors and quantum computing. Although the Biden administration’s objective is clear—to kneecap China’s semiconductor ascent—this gambit is not likely to work. The complexity of today’s tech landscape, with its entangled supply lines and “gray channels” of unofficial trade, underscores the futility of isolating China. Chinese firms continue advancing, with the support of both local innovation and resilient demand for tech alternatives.

Despite escalating sanctions designed to strangle China’s chip industry, the true costs of these measures ripple far beyond Beijing. American allies find themselves isolated, and domestic companies feel the sting of lost revenues. Take Nvidia, for instance. The American AI chip giant introduced its groundbreaking Blackwell architecture in March but offered a downgraded version to maintain ties with the Chinese market, a reluctant acknowledgment of a complex interdependence that persists despite Washington’s aspirations.

These efforts to stem China’s progress are as much a commentary on America’s anxiety over competition as they are on Beijing’s resilience in pushing forward, innovating, and navigating the geopolitical minefield. Even American firms like Semianalysis, which advocates for the strictest sanctions, concede that China is now advancing past the United States in achieving intelligent computing capabilities. The “wall” designed to keep China out is riddled with gaps. China’s resourcefulness exploits these gaps. With substantial clean energy reserves to power vast computing clusters, where the United States often struggles with shortages, China is less beholden to America’s chip arsenal. Although its H20 chips fall short of Nvidia’s H200, innovative local firms are rapidly narrowing the gap. Meanwhile, U.S. attempts to regulate global trade through restricted entity lists has proven little more than a game of “whack-a-mole,” where new avenues emerge faster than they can be closed.