Researcher: Trump Could Seek Sanctions Against Major Chinese Firms, Broader Export Controls

The U.S. will probably increase its use of sanctions and export controls no matter who wins the upcoming presidential election, although a Donald Trump-led administration would be more likely to pursue drastic measures that could accelerate U.S.-China decoupling, said Martin Chorzempa, a senior fellow with the Peterson Institute for International Economics. Those measures include expanding the use of the Bureau of Industry and Security’s foreign direct product rule or placing blocking sanctions on major Chinese companies such as Huawei.

Chorzempa, speaking during an event this week hosted by PIIE, said the constant pace of U.S. sanctions designations, trade controls and foreign investment restrictions will likely continue under either Kamala Harris or Trump, partly because there’s such large bipartisan consensus around U.S. restrictions against China.

“I look at this as kind of a crank that moves in one direction,” he said. “It can get tighter, but then if you try to move it backward, it stops on political opposition, especially from Congress.”

Harris would likely continue the Biden administration’s strategy of coordinating sanctions and export controls with key allies, Chorzempa said. Under a Harris victory, he also said, the U.S. wouldn’t look to decouple with China but would instead carry on Biden’s “derisking” approach.

Trump would likely employ a more aggressive strategy that could push the U.S. further down a decoupling path, Chorzempa said. He noted that Trump has said he wants to eliminate U.S. dependency on China, including in electronics, semiconductors, pharmaceuticals and biotech.

Chorzempa specifically said Trump could ratchet up export controls against China through “probably much more indiscriminate use” of the BIS Entity List or the FDP rule, which places export license restrictions on certain foreign-made items that are made with U.S.-origin software or technology. He could look to use those tools “not just as a scalpel, but instead applying this much more broadly to force U.S. firms to stop selling to China,” Chorzempa said, even “if the long-term costs would be enormous.”

Trump also could heed calls from some House Republicans (see 2310100023 and 2309150020) by placing full blocking sanctions against major Chinese technology companies, such as Huawei, Chorzempa said. He said that’s “the thing that I worry about most,” noting that the Biden administration hasn’t used Treasury Department sanctions to target many major Chinese companies, in part because it has wanted to “keep that in the pocket for a really bad scenario,” and in part due to the significant ripple effects those sanctions could have on other economies and countries that use Huawei equipment in their telecommunications networks

“If you put Huawei on the SDN list, then the kind of updates and maintenance payments that these countries and companies have to make to maintain their telecommunications infrastructure would suddenly be a U.S. sanctions violation,” he said. “So they would face some really serious negative consequences and major risks.”

Chorzempa noted that some believe Trump could attempt to reenter the White House as a “deal maker,” and try to negotiate a new agreement with Beijing in which the U.S. would offer to remove some trade controls in exchange for Chinese purchases of U.S. products. But he views that as unlikely, adding that the “political firestorm of him trying to make a deal that removes some of these national security restrictions would be enormous in Washington.”

“I think what's much more likely is an accelerated decoupling scenario,” he said. “I think we'd likely see this highly destabilizing advanced decoupling.”