US Weighs Software Export Restrictions in Escalating Tech Trade War with China

Potential Software Export Controls Signal New Phase in US-China Trade Tensions

The Trump administration is reportedly considering sweeping restrictions on exports to China that contain or were produced using US software, marking a significant escalation in the ongoing trade conflict between the world’s two largest economies. According to sources familiar with the matter, the proposed measures could affect a wide range of products from consumer electronics to advanced industrial equipment.

Potential Software Export Controls Signal New Phase in US-China Trade Tensions
Broad Scope of Proposed Restrictions
Timing and Political Context
Implementation Challenges and Industry Impact
Historical Context and Precedent
China’s Response and Broader Implications

This development represents a strategic shift in US trade policy that could have far-reaching implications for global supply chains and technology markets. The consideration of software-based export controls comes as retaliation against China’s recent expansion of rare earth export restrictions, highlighting how trade tensions are increasingly moving into critical technology sectors.

Broad Scope of Proposed Restrictions

The potential restrictions would leverage America’s dominance in software development to pressure China, affecting “everything imaginable” according to one source briefed on the discussions. This approach mirrors the strategy employed by the Biden administration against Russia following its invasion of Ukraine, where exports of items manufactured globally using US technology or software were restricted.

“Clearly the US is looking for points of leverage and we are really good at software, so it’s not so surprising that this administration has considered it,” said Emily Kilcrease, a former trade official now at the Center for a New American Security. However, she cautioned that implementation would be extraordinarily difficult and could create significant blowback for US industry.

Timing and Political Context

The discussions about software export controls emerge at a particularly sensitive moment in US-China relations. President Trump’s initial threat came via a Truth Social post on October 10, just three weeks before a scheduled meeting with Chinese President Xi Jinping in South Korea and one day after China expanded its rare earth export controls., as comprehensive coverage, according to emerging trends

The administration appears to be employing a carrot-and-stick approach. While threatening severe measures including 100% tariffs and software export controls, Trump subsequently softened his tone, posting on October 12 that “The USA wants to help China, not hurt it!!!” This pattern of escalation followed by conciliation has characterized US-China trade negotiations throughout Trump’s presidency., according to recent studies

Implementation Challenges and Industry Impact

Experts highlight several significant challenges in implementing such broad software export controls:

Global supply chain complexity: Modern products often incorporate components from multiple countries with varying degrees of US software content
Definitional issues: Determining what constitutes “critical software” and establishing thresholds for restriction
Enforcement mechanisms: Tracking and verifying software content in globally manufactured goods
Economic consequences: Potential harm to US software companies and their global customers

US stock markets reacted negatively to the news, with the S&P 500 briefly falling 0.8% and the Nasdaq dropping 1.3% before recovering some losses, indicating investor concern about the potential disruption to technology trade.

Historical Context and Precedent

The Trump administration has demonstrated a pattern of imposing and then lifting technology restrictions on China. Earlier this year, the US imposed then removed restrictions on Nvidia’s and AMD’s AI chips, and in May implemented then lifted in July restrictions on chip design software following rare earth disputes.

This history suggests the current software export control considerations could serve as a bargaining chip rather than a definitive policy. One source noted that administration officials could announce the measure to pressure China but stop short of full implementation.

China’s Response and Broader Implications

While not commenting specifically on the software export control proposal, a Chinese embassy spokesperson reiterated Beijing’s opposition to US unilateral measures and vowed to “take resolute measures to protect its legitimate rights and interests” if the US proceeds with what China views as inappropriate actions.

The escalating trade measures reflect deeper technological competition between the US and China, with software joining semiconductors, artificial intelligence, and rare earth materials as focal points in the broader strategic rivalry. As both nations approach the November 1 deadline mentioned in Trump’s social media post, the international business community watches closely for signs of which threats will materialize into actual policy.

With additional diplomatic engagement planned, including a meeting between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng in Malaysia ahead of the Trump-Xi summit, there remains potential for negotiation to avert the most severe trade restrictions.