By Alexandra Alper, Michael Martina, Jeffrey Dastin and Karen Freifeld
(Reuters) -The Trump administration is considering a plan to curb a staggering range of software-driven exports to China, from laptops to jet engines, in retaliation against Beijing’s latest round of rare earth export restrictions, a U.S. official and three people briefed by U.S. authorities said.
While this plan is not the only one being considered, it would make good on President Donald Trump’s threat earlier this month to ban the export of “critical software” to China by restricting global shipments of items containing or produced with U.S. software.
On October 10, Trump said in a social media post that he would impose additional 100% tariffs on Chinese shipments to the US by November 1 without further details, along with new export controls on “all critical software.”
It is fair to say that the measure, details of which are being reported for the first time, may not make progress, the sources said.
But the fact that such checks are being considered shows that the Trump administration is considering a dramatic escalation of its confrontation with China, even as some within the US government favor a softer approach, two of the sources said.
“I will confirm that everything is on the table,” US Treasury Secretary Scott Bessent told reporters at the White House on Wednesday when asked about software restrictions on China. “If these export controls – whether on software, engines or other items – take place, it will likely be done in consultation with our G7 allies.”
U.S. stock indexes fell after the Reuters report before paring losses. The S&P 500 closed 0.5% lower, while the Nasdaq was down about 1% at market close.
Emily Kilcrease, a former trade official now at the Center for a New American Security, said software is a natural lever for the US. Still, such controls would be extremely difficult to implement and lead to a backlash for U.S. industry, she said.
“You would hope that they would just make threats that they would carry out and stick to,” Kilcrease said.
The White House declined to comment. The Commerce Department, which oversees export controls, did not respond to requests for comment.
A Chinese embassy spokesperson did not comment on the specific U.S. measures being considered, but said China opposed the U.S. “imposition of unilateral long-arm jurisdiction measures” and vowed to “take decisive action to protect its legitimate rights and interests” if the U.S. continues on what it considers a wrong path.
MEASURE CAN BE USED TO PRINT CHINA
Government officials could announce the measure to put pressure on China but would stop short of implementing it, one of the sources said. Narrower policy proposals are also being discussed, two people said.
“Everything you can imagine is made with American software,” one of the sources said, highlighting the broad scope of the proposed action. The sources declined to be named because the matter was not public.
The move could disrupt global trade with China, especially for technology products, and could be detrimental to the U.S. economy if fully implemented.
It reflects restrictions the Biden administration imposed on Moscow after its invasion of Ukraine in 2022. These rules limited exports to Russia of products made worldwide using American technology or software.
Trump’s Truth Social post came just three weeks before a previously announced meeting with Chinese President Xi Jinping in South Korea, and a day after China dramatically expanded its export controls on rare earth elements. China dominates the market for such elements, which are essential for technological production.
In his post, Trump also accused China of considering “large-scale export controls on virtually every product” it makes and on some foreign-made items, which he said would affect all countries, including starting Nov. 1. Such a move would be “a moral disgrace,” he added.
But questions have been raised about what Trump meant by “critical software” controls in his response.
While Trump has imposed a series of tariffs on China since taking office in January, he has wavered in his use of export controls against Beijing. He first imposed strict new restrictions on the shipment of AI chips from Nvidia and AMD before later removing them.
Similarly, the U.S. imposed new restrictions on chip design software and other products in late May after China held up shipments of rare earth metals needed by U.S. automakers and others, only to lift the restrictions in early July.
Meanwhile, China last month voiced its opposition to a Trump administration rule banning U.S. companies from shipping goods and technology to companies that are at least 50% owned by sanctioned Chinese companies.
Chinese imports currently face US tariffs of around 55%, which could rise to 155% if Trump follows through with his threatened tariff hike. But Trump appeared to soften his stance toward Beijing after the threats, posting on Oct. 12 that “the US wants to help China, not hurt it!!!”
US Treasury Secretary Bessent is expected to meet with Chinese Vice Prime Minister He Lifeng in Malaysia this week, ahead of Trump’s meeting with Xi in South Korea later this month.
(Reporting by Alexandra Alper and Michael Martina in Washington, Jeffrey Dastin in San Francisco and Karen Freifeld in New York; additional reporting by Trevor Hunnicutt and Jeff Mason; Editing by Chris Sanders and Edmund Klamann)
