The Trump administration is considering changes to the Framework for Artificial Intelligence Diffusion, a regulation from the Biden era that controls global access to advanced AI chips.

The current tiered system, which categorizes countries into Tier 1, Tier 2, and Tier 3 based on chip access, may be replaced with a licensing framework based on government-to-government agreements.

This shift is being discussed to align with broader trade strategies.

The regulation, set to take effect on May 15, 2025, aims to limit access to advanced AI chips, particularly for countries like China, Russia, Iran, and North Korea.

Critics, including Oracle executive Ken Glueck and seven Republican senators, argue that the current tier structure is flawed and could drive countries to seek technology from China instead.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Semiconductor export controls have historically become political bargaining chips

The potential shift from tiered access to bilateral agreements aligns with a decades-long pattern of using semiconductor access as geopolitical leverage.

During the 1986 U.S.-Japan Semiconductor Agreement, the U.S. threatened legal action against Japanese firms to secure chip export and pricing concessions, setting a precedent for using semiconductor access as a trade policy tool 1.

This approach eventually led to market distortions rather than improved competitiveness, with American computer manufacturers arguing that the agreement harmed their ability to compete by raising chip prices 1.

Trump’s preference for bilateral trade negotiations has been evident in his first term, and the proposed shift away from tiered access toward government-to-government agreements would give his administration greater flexibility to negotiate country-specific terms.

The Semiconductor Industry Association has consistently warned that poorly calibrated export controls can undermine U.S. competitiveness and leadership, advocating instead for narrowly targeted restrictions that address specific national security concerns 2.

2️⃣ Export restrictions often create backdoor markets and unintended consequences

Current evidence suggests that strict export controls can drive countries toward alternative suppliers or unofficial channels rather than achieving their intended goals.

Despite the 2022 ban on exporting Nvidia’s A100 chips to China, black market activities have emerged with chips being smuggled through countries like Malaysia and Japan, commanding premium prices in Chinese markets 3.