The Missing Piece in America’s Tech Strategy

President Donald Trump announces reciprocal tariffs at the White House on April 2, 2025, as Commerce Secretary Howard Lutnick presents a chart. (Brendan Smialowski/AFP via Getty Images)

For the past few years, Washington has started to treat economic policy less like economics and more like strategy. Export controls, investment restrictions, and industrial subsidies are no longer just about competitiveness or growth—they are meant to shape the trajectory of China’s technological development.

This shift makes sense. Technologies like advanced semiconductors sit at the center of both economic and military power. Slowing China’s progress in that space is not just an economic objective, it is a strategic one. The export controls introduced in 2022 made that clear, with the Biden administration imposing sweeping restrictions on advanced chip exports and the equipment used to produce them. They were measures the Commerce Department described  as necessary to limit China’s access to high-end computing power..

This way of thinking reflects a broader recognition that supply chains and markets are not neutral. They shape outcomes. If a country can influence how a system functions, it can influence what its competitors are able to do within it.

However, there is a difference between recognizing that and successfully acting on it.

The current approach assumes that if the United States restricts access to key technologies, the system will respond in relatively predictable ways, but in  reality, the system is much harder to steer than it looks on paper.

Take semiconductors. The United States has real advantages, especially in design and high-end innovation, yet the industry itself is spread across multiple countries and companies, each with its own incentives. Manufacturing is concentrated in Taiwan through firms like TSMC, while critical lithography equipment is produced by the Dutch company ASML, whose machines are essential for  advanced chip production. Materials and components are sourced from Japan and elsewhere. No single government sits above all of this, directing how it works.

That is why so much attention has been placed on coordination with allies. Without alignment from countries like Japan and the Netherlands, U.S.-imposed restrictions lose much of their force; and to some extent, that coordination has happened, with both countries moving to restrict exports of advanced semiconductor equipment, though not always at the same speed or scope as Washington.

Allies are not just partners. They are also economic actors with their own interests. Limiting exports to China carries real costs for companies in those countries. Even when governments agree on the direction of policy, they do not always move at the same speed or in exactly the same way. Those differences matter. They create space for adjustment, and over time they can soften the impact of restrictions.

Still, even perfect coordination would not fully solve the problem.

The deeper issue is that the system Washington is trying to shape is not actually driven by governments. It is driven by firms. Governments can set rules, but they do not decide where companies build factories, how they organize production, or how they respond when conditions change. In a sector as complex as semiconductors, those decisions determine what the system looks like in practice.

That makes economic statecraft inherently indirect. Policies do not act on outcomes;, they act on companies that then decide how to adjust—and companies are good at adjusting. They shift supply chains, redesign processes, and find ways to stay competitive within whatever constraints are given. Nvidia, for example, redesigned versions of its AI chips to comply with U.S. export controls while continuing to sell into the Chinese market, illustrating how firms adapt rather than simply absorb restrictions.

China’s response reflects this dynamic. Restrictions on access to advanced technology have not just slowed progress in certain areas, they have also reinforced the importance of building domestic capacity. The push for greater self-reliance in semiconductors did not start with U.S. export controls, but those controls have made it more urgent, accelerating Beijing’s long standing efforts to reduce dependence on foreign technology.

None of this means the current strategy is misguided. The United States is right to treat economic tools as part of competition with China. Ignoring that reality would be a mistake. However, there is a gap between understanding the importance of economic statecraft and being able to use it effectively.

Right now, much of the focus is on what governments can do. That makes sense. Governments write the rules. They coordinate with allies. They design policies. Still, they are not the only actors that matter. In many cases, they are not even the most important ones when it comes to how outcomes actually unfold.

If the goal is to shape how technology develops and how supply chains evolve, then the role of industry cannot be an afterthought. Companies are the ones making decisions that turn policy into reality. Without a clearer effort to engage with them, align incentives, and account for how they operate, strategy will always be working one step removed from the system it is trying to influence.

The United States may have adjusted to the idea that economic competition is now central to its rivalry with China, but the next step is recognizing that this competition is not carried out by governments alone. It runs through the firms that design, build, and move the technologies at the center of it. Until policy fully reflects that, America’s approach will remain incomplete in ways that truly matter.