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The News
The US is considering using the most severe trade restrictions possible on Japanese and Dutch chipmakers as part of its crackdown on China’s semiconductor sector.
Washington’s foreign direct product rule allows the US to impose controls on imports that use even the slightest amount of American technology, Bloomberg reported, a move that is seen as “draconian” by allies.
SIGNALS
Attempts to form a ‘unified front’ against China’s chip industry may have failed
That the Biden administration is weighing up stricter rules suggests “attempts to form a united front against China’s chip ambitions have fallen short,” Bloomberg noted. Countries usually allied to Washington are reportedly reluctant to alter their policies ahead of the US presidential elections in November, particularly as much of their revenue comes from China. Overall, export controls may nonetheless be working to stifle Beijing’s chip industry, which is likely to encounter “more and more challenges in maintaining the pace of innovation” over time, a Rand corporation expert told The Atlantic. As a latecomer to the market, China is trying to close a gap between itself and foreign competitors that is only widening, he added.