Just hours after U.S. President Donald Trump threatened to impose tariffs on China-made goods in retaliation for unprecedented export controls on rare earth materials, he actually did so, increasing import tariffs on Chinese goods to 100% starting November 1. In addition, the U.S. will impose export controls on 'critical software,' something that may be more crippling than the tariffs.
A 100% tariff
China's new policy requires companies to obtain government approval before exporting any product containing more than 0.1% of rare earths that originate from or are processed in the country. The list of materials includes seven rare-earth families, including samarium, terbium, dysprosium, and lutetium, as well as their magnet and sputtering-target forms. Assuming that the list is accurate, China expands its 'Tier 3' restrictions introduced this April, which means no critical hit to foundation materials, but precisely crippling hits along the way of devices and industries worldwide.
Given that the lion's share of the global rare earth supply is under China's control, the export control decision has raised alarms in multiple sectors, including automotive, consumer electronics, and chip manufacturing. How exactly this could hurt the industries is something that remains to be seen, but China's plan to impose additional control globally is already evident.
Critical software
In response, the U.S. will not only double tariffs (which is set to hit American businesses first), but also introduce export restrictions on 'critical software,' which is perhaps the most crippling sanction. The U.S. government does not define what 'critical software' is, which leaves the door open to misunderstanding. So, let us speculate.
Earlier this year, the Trump administration restricted shipments of chip design and simulation tools to China while the president was negotiating with the Chinese leader. That helped resolve some of the fundamental issues with rare-earth exports from China and made life easier for Cadence and Synopsys.
What happens if the Trump administration broadens the definition of 'critical software' beyond EDA tools? The following targets are likely to include AI development frameworks such as PyTorch, TensorFlow, and JAX, as well as distributed-training software that enables large-scale model training on advanced accelerators. Limiting access to this software would directly constrain China's ability to develop advanced AI systems, even if it manages to procure the necessary hardware.
Another area likely to come under scrutiny is compilers, firmware, and embedded software that control the operation of hardware. This includes CPU and GPU microcode, as well as FPGA configuration tools, which could potentially harm American and European companies with production operations in China, but will also impact Chinese companies.
Controls could also reach manufacturing and infrastructure software, which will include everything from network management (unless already replaced by modern, closed-source Linux from a China-based company) to wafer fab equipment (WFE) tools that tend to run customized versions of Linux and Windows. It will not collapse them overnight, but will introduce a new set of operational difficulties.
Then again, without a precise definition, this is all speculation.
Follow Tom's Hardware on Google News, or add us as a preferred source, to get our latest news, analysis, & reviews in your feeds.
