Trump Has Few Good Options to Slow China’s Rise as AI Superpower

(Bloomberg) -- Even as Donald Trump blasts Anthropic PBC's Dario Amodei over his call to hit the brakes on AI development, the two agree on the need to prevent China from catching the US. But doing that remains difficult in practice.

In his 3,800-word missive titled "We Must Pace the Frontier," Amodei called on policymakers to avoid selling China advanced AI chips, crack down on chip smuggling and prevent "unauthorized distillation by companies in authoritarian countries," among other steps. He urged democracies to maintain a lead "as large as possible," echoing language from the Biden administration.

While Trump maintains export controls on the most advanced chips and chipmaking equipment, he's also been open to selling China semiconductors such as Nvidia Corp.'s H200s, which Beijing has avoided to develop its own sector. So far his administration has refrained from more punitive measures to crack down on chip smuggling in Southeast Asia, and demurred on sanctions or entity-list designations for Chinese companies found to have carried out systematic distillation from US systems.

The main challenge for the US is keeping China at bay without prompting Beijing to further restrict rare earths used in high-tech products like precision-guided missiles and drones. Trump and Xi Jinping reached a truce last year that saw Beijing guarantee flows of rare earths in return for reduced tariffs, a deal likely to be extended next week when the Chinese leader visits the White House.

"Washington has to tread carefully now that Beijing has sharper retaliatory tools, such as export controls on rare earths," said Kyle Chan, a fellow in the John L. Thornton China Center at Brookings. "Also, American AI boom relies on many data center components from China."

China has continuously narrowed the gap with the US on AI despite the restrictions, as Xi pours money into becoming self-sufficient on the entire tech stack. Although China remains behind on chip production, AI models from companies like Deepseek and Moonshot have reduced the gap with US frontier offerings in capability, often at a fraction of the cost — threatening to pull away market share from Silicon Valley giants Anthropic and OpenAI.