US mulls curbs on exports to China made with US software, sources say

While the plan is not the only one being deliberated, it would make good on President Donald Trump's threat earlier this month to bar "critical software" exports to China by restricting global shipments of items that contain U.S. software or were produced using U.S. software.

On October 10, Trump said in a social media post that he would impose additional tariffs of 100% on China's U.S.-bound shipments, along with new export controls on "any and all critical software" by November 1 without further details.

To be sure, the measure, details of which are being reported for the first time, may not move forward, the sources said.

But the fact that such controls are being considered shows the Trump administration is weighing a dramatic escalation of its showdown with China, even as some within the U.S. government favor a gentler approach, according to two of the sources.

"I will confirm that everything is on the table," U.S. Treasury Secretary Scott Bessent told reporters at the White House Wednesday when asked about software curbs on China. "If these export controls - whether it's software, engines or other things - happen, it will likely be in coordination with our G7 allies."

U.S. stock indexes dipped following the Reuters report, before paring losses. The S&P 500 closed down 0.5% while the Nasdaq was about 1% lower at the market's close.

Emily Kilcrease, a former trade official now at the Center for a New American Security, said software was a natural point of leverage for the U.S. Still, such controls would be extraordinarily difficult to implement and would lead to blowback for U.S. industry, she said.

"You would hope they are only putting threats on the table that they would carry out and stick with," Kilcrease said.

The White House declined to comment. The Commerce Department, which oversees export controls, did not respond to requests for comment.

A spokesperson for the Chinese embassy did not comment on the specific U.S. measures under consideration but said China opposed the U.S. "imposing unilateral long-arm jurisdiction measures" and vowed to "take resolute measures to protect its legitimate rights and interests" if the U.S. proceeds down what it views as a wrong path.

MEASURE COULD BE USED TO PRESSURE CHINA

Administration officials could announce the measure to put pressure on China but stop short of implementing it, one of the sources said. Narrower policy proposals are also being discussed, two of the people said.

"Everything imaginable is made with U.S. 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 come at a cost to the U.S. economy if fully implemented.

It echoes restrictions the Biden administration imposed on Moscow after its 2022 invasion of Ukraine. Those rules restricted exports to Russia of items made globally using U.S. 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 to tech manufacturing.

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, also starting November 1. Any such move would constitute "a moral disgrace," he added.

But questions have swirled about what Trump meant in his response by "critical software" controls.

While Trump has slapped a series of tariffs on China since taking office in January, he has wavered in his use of export restrictions against Beijing, first imposing strict new curbs on shipments of Nvidia's and AMD's AI chips before later removing them.

Likewise, in late May, the U.S. imposed new restrictions on chip design software as well as on other items after China held up rare earth shipments needed by U.S. automakers and others, only to lift the restrictions in early July.

Meanwhile, China has expressed its opposition to a Trump administration rule last month that restricts U.S. companies from shipping goods and technology to companies at least 50% owned by sanctioned Chinese firms.

Chinese imports currently face U.S. tariffs around 55%, which could shoot up to 155% if Trump follows through on his threatened tariff hike. But Trump appeared to soften his posture on Beijing following the threats, posting on October 12 that "The U.S.A. wants to help China, not hurt it!!!"

U.S. Treasury Secretary Bessent is expected to meet with Chinese Vice Premier He Lifeng in Malaysia this week, ahead of the meeting between Trump and Xi in South Korea later this month.