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Weekend Reads
DeepSeek’s release of its artificial intelligence model shook global markets and pushed the idea that China could challenge America’s tech industry. But the Chinese AI firm allegedly relied on illicitly acquired data along with technical expertise from Microsoft and other United States–based tech leaders.
In The Wall Street Journal, Thomas Duesterberg explains how smart US trade policy could undercut China’s ability to exploit American innovation. His recommendations are below.
Key Insights
1. China benefits from access to US technology and expertise.
The New York Post reported that Microsoft’s Chinese research labs helped train four key DeepSeek researchers, three of whom spent five to ten years working at the lab. Additionally, OpenAI has alleged that DeepSeek used American proprietary models to train its systems. Finally, the US Commerce Department is reportedly investigating DeepSeek’s possible use of Nvidia chips that are subject to American export controls.
2. Beijing artificially boosts Chinese companies to attract vital outside investment.
Facing economic troubles, Beijing is taking steps to lure Western investors into providing Chinese tech companies crucial financial support to fund Chinese innovation. Specifically, Beijing has: issued guidance to “undervalued firms” to buy back their own shares, artificially boosting their stock prices; directed domestic banks flush with cash from China’s trade surplus to make funds available to stockbrokers by collateralizing their shareholdings and authorizing loans to firms buying back their own shares; and injected $69 billion into China’s largest banks to help supply loans to stockbrokers.
3. China’s weak economy gives the US an opportunity to crack down on Beijing’s exploitation.
The Trump administration should take five steps:
- Tighten export controls on technology and expertise related to AI or national defense.
- Work with Congress to restrict Chinese access to US financing, with stronger outward investment controls and limited access to listing on American stock exchanges.
- Impose sanctions on Chinese banks, many of which may have facilitated and financed illicit commerce such as technology transfer to Russia, drug trafficking, money laundering, and the purchase of sanctioned Iranian and Russian oil.
- Reciprocate Beijing’s restrictions on American firms by either banning Chinese companies from the US market or making their entry contingent on unrealistic requirements, such as revealing source code.
- Enlist allies in the fight to limit China’s ability to compensate for losing the US market.
Quotes may be edited for clarity and length.
Go Deeper
To prevail over China in the tech race, the US needs export control strategies that address national security concerns while allowing American companies to compete globally. Nury Turkel explains how Washington can implement this strategy in a Hudson policy memo.
Chair of the Council of Economic Advisers Stephen Miran laid out the strategy behind the Trump administration’s tariff agenda and offered five ways allies can better share the United States’ financial burden.
Watch the event, listen to the podcast, or read the transcript.
