ICAS Trade ‘n Tech Dispatch (online ISSN 2837-3863, print ISSN 2837-3855) is published about every two weeks throughout the year at 1919 M St NW, Suite 310, Washington, DC 20036.
The online version of ICAS Trade ‘n Tech Dispatch can be found at chinaus-icas.org/icas-trade-technology-program/tnt-dispatch/.
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With the Trump–Xi meeting fast approaching, the battle lines on technology ties are being drawn and boldened. It seems there must be no Chinese-owned or -controlled vehicles allowed to enter the U.S. market. Earlier this January, Trump flirted with the prospect of inviting Chinese automakers to the U.S., so long as they build their vehicles in the country. There must be a clampdown on the sale of all AI chips to China, critics demand. Prior, Trump green-lit the sale of advanced-node—although not cutting-edge—AI chips to China. Beyond their mere sale, Chinese companies must also be blocked from accessing export-controlled chips through the cloud, as well as from access to U.S. AI models themselves. Third parties are not being spared either. Some are floating the argument that the Trump administration should use the Foreign Direct Product Rule to pressure the Netherlands to halt ASML’s EUV (extreme ultraviolet) lithography shipments to China. Semiconductor manufacturing tools are deemed to be the most significant controllable factor in ensuring U.S. leadership vis-à-vis China in the AI race. A slew of bills to compel allies to bolster export controls has also been winding its way forward on Capitol Hill.
China has not been quiescent either. With a one-sentence dismissal, it killed Meta’s acquisition of the Singapore-domiciled Chinese AI startup Manus this week. A few days earlier, it issued an “Anti-Improper Extraterritorial Jurisdiction” regulation that comes with a name-shame-and-punish “Malicious Entities List.” The list is an upgrade over its existing “Blocking Rules” and “Unreliable Entities List.” And earlier this April, after studying the text of the U.S. Trade Representative’s Agreements on Reciprocal Trade (ART), it bolstered its supply chain-specific countermeasures authority, which will impact Beijing’s trade relations with the U.S.’ third-party trading partners. Beijing’s “Security of Industrial Supply Chain” regulation comes on the heels of its revised Foreign Trade Law, which elevates security objectives alongside trade promotion objectives. Clearly, trade decoupling and technology competition, backed by ample sanctions, are baked into the bilateral economic relationship.
Having said that, could policy coordination and cooperation in the AI space nevertheless be a somewhat surprising deliverable from the Trump–Xi meeting? Don’t count it out. The landmark breakthrough in AI-enabled cybersecurity—and, by extension, cyber warfare—headlined by Anthropic’s newest model, Claude Mythos Preview, has added a new urgency to preventing the spread of the technology to ill-intentioned third-party actors, including non-state actors. And the two sides are edging toward a conversation in this regard (think of U.S. conversations with the Soviets on nonproliferation once both sides had detonated their atomic devices). A Trump–Xi conversation on AI will look nothing like the predecessor conversation that the Chinese side had with the Biden administration. The primary focus of that conversation had been on AI safety—that is, on reining in high-risk AI frontier models from an ethical risks and algorithmic harms perspective. National security-linked conversations will dominate this time. To be fair, the Biden team had sought to establish certain bilateral rules of the road to ensure that unsupervised AI would not be allowed to dictate command and control of critical weapons systems. But that said, the purpose of those conversations had been much more expansive from a thematic standpoint—just as Biden’s domestic regulatory intent on AI had been all-encompassing. This time around, the U.S.–China conversation is expected to be narrower, shaped by national security and geopolitical considerations rather than ethics, transparency, and safety, and geared toward countering the mutually destructive attributes of the technology.
China may be an existential competitor, but it can also be a manageable and useful counterpart, at times. The Trump-Xi discussions on AI in Beijing will hopefully capture this essential duality.
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In One Sentence
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Keeping an Eye On…
Listen up, y’all—it’s payback time. As in, paying back the mountain of “reciprocal tariffs,” totaling in excess of $160 billion, that was levied and collected by the Trump administration, and which now needs to be returned to the American people. The Supreme Court judged those tariffs to have been unlawfully collected in its February 20 ruling. To the administration’s credit, the Treasury Department has already made headway in processing these refunds. On April 20, the first phase of the Consolidated Administration and Processing of Entries (CAPE) tool on the U.S. Customs and Border Protection portal went live. CAPE Phase 1 is expected to process 60% of the shipments over the past year that triggered the duties, with the first refunds being issued on or about May 11.
From a political standpoint, the refund process is tilted in favor of big businesses and shareholders, and at the expense of small- and mid-sized (SME) businesses, consumers, and foreign exporters. Legally, only the importer of record or an authorized customs broker can serve as the designated point of refund. Given that big businesses enjoy the luxury of maintaining large legal teams, as well as customs brokers on retainer, their administrative capacity to file and pursue claims is infinitely superior to that of SMEs. Little wonder, then, that a fair share of small businesses with tight cash-flow operations have already opted to sell their rights to refunds to Wall Street investment firms—some as low as 25 cents on the dollar—rather than submit to an uncertain, time-consuming, and complex process. The CAPE system allows importers to designate third parties to receive refunds on their behalf.
As for consumers, the outcome, on the surface, appears to be just as raw, given that they are estimated to have absorbed roughly 90 percent of the cost of the tariffs. That said, consumers have already begun to lawyer up, as reflected in class action complaints that plan to accuse importers of unjust enrichment and failure to pass on the refunds. Significant derivative consumer litigation is almost a certainty. Quick to spot an opportunity, national and statewide politicians have piled onto big-box retailers, such as Walmart, Amazon, Home Depot, Target, and Costco, and their ilk, demanding that these retailers ensure that the tariff relief reaches end consumers rather than pad corporate balance sheets. No such luck or recourse awaits foreign exporters, though, including Chinese exporters, who lack both legal standing and a domestic political champion. They will likely have to walk away from the process empty-handed.
Almost exactly thirteen months after “Liberation Day” was declared with bombast in the Rose Garden, the reciprocal tariffs have degenerated into an ignominious spectacle. The refunds ordered are just the start of a long, winding, and litigious—but thankfully final—phase. The tariffs, of course, are not disappearing; they will live on under different guises (Section 122, Section 232, Section 301, etc.). The abuse of emergency power to impose them on exporters, importers, and consumers alike, however, will now be a thing of the past.
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