Economic Statecraft on Chaos Mode
Trump’s reversal on Nvidia chip sales to China exposes a deeper rot: U.S. export control policy is running on vibes and private interests.
Nicholas Jon Ganjei was having a great start to his week. The recently appointed U.S. Attorney for the Southern District of Texas had just announced a major victory against Chinese chip smuggling networks.1 Using the code name “Operation Gatekeeper,” his colleagues intercepted efforts to sneak at least $160 million worth of Nvidia H100 and H200 chips into China in violation of export controls. Preventing China from obtaining this critical technology is a centerpiece of U.S. economic statecraft. As Attorney Ganjei triumphantly explained upon the announcement:
These chips are the building blocks of AI superiority and are integral to modern military applications. The country that controls these chips will control AI technology; the country that controls AI technology will control the future. The Southern District of Texas will aggressively prosecute anyone who attempts to compromise America’s technological edge.2
This must have felt good to deliver. But what probably felt less good was seeing the President post the following just a few hours later:
I have informed President Xi, of China, that the United States will allow NVIDIA to ship its H200 products to approved customers in China, and other Countries, under conditions that allow for continued strong National Security. President Xi responded positively! $25% [sic] will be paid to the United States of America….3
This doesn’t reverse Operation Gatekeeper. The arrested co-conspirators still violated export controls as they were defined at the time, and therefore will spend up to 10-20 years in federal prison. But, for Ganjei, this must be annoying. He had just spent the morning proclaiming that the DOJ will mercilessly track down H200 chip smugglers to protect America’s “technological edge.” Only to learn later that evening that export controls on those AI chips had been unceremoniously lifted. But hey, at least President Xi (“of China,” in case you weren’t sure) reacted positively.
Yesterday’s flip-flop messaging points toward a bigger trend: U.S. economic statecraft is running on chaos mode. Numerous observers have noted the general incoherence of this Administration’s foreign policy decisions. Here I want to focus specifically on export controls. Because things aren’t pretty under the hood.
No Measurable Standards of Success
What exactly are export controls supposed to achieve? Policymakers tend to employ loose verbs like slowing China, maintaining America’s edge, or inhibiting Russia’s war machine. But according to a recent report by the Government Accountability Office (GAO), we have no measurable standards of success:
U.S. agencies have not established specific objectives that are linked to measurable outcomes with targets…This limits the U.S. government’s ability to determine the effectiveness of its collective Russia-related sanctions and export controls efforts. Such information is crucial for improving current efforts and may provide important lessons learned for future scenarios where the U.S. government is considering the use of sanctions and export controls.4
American foreign policy is, in other words, operating on vibes. And the details from specific agencies are revealing. The State Department does not just lack measurable outcomes with specific targets. As of May 2025, it is not analyzing U.S. sanctions or export controls on Russia at all “due to insufficient resources.”5 Not analyzing! Nor is the Bureau of Industry and Security. The BIS has analyzed the costs export controls have imposed on Russia. But these are not compared to any measurable targets that might be construed as measures of effectiveness.6
This isn’t a new problem. Back in 1976, a Department of Defense taskforce on export controls against Communist countries lamented “the absence of established criteria for evaluating technology transfers.”7 But there was at least a clear objective: preserve U.S. lead time. The specific approach to achieving this objective depended on whether America maintained a “revolutionary” advantage in the relevant technology or was on the same “evolutionary” path as its adversary.
Similar thinking has guided contemporary U.S. export controls on China. Both the first Trump and Biden administrations were aware that China is engaged in a decades-long effort to catch up to the West in semiconductor technology. Export controls on chips like the H200 were designed to slow those efforts down. As Gregory C. Allen explained in a recent MSNBC appearance:
…if [export controls] hadn’t gone forward, [Chinese telecommunication giant] Huawei would be a vastly stronger competitor facing Nvidia right now…[China] has said, in policy and investments totaling hundreds of billions of dollars, that they don’t want a future that includes us. And the question is, what should we do in the meantime? Should we help them build the bridge to the future that doesn’t include us? Or should we make that as expensive and as complicated as possible?8
But apparently certain Trump officials are not convinced. Semafor reported that “some in the White House believe those restrictions have more or less failed…”9 The primary concern is that U.S. export controls have inadvertently supercharged China’s efforts to develop domestic alternatives. And then there is the smuggling. As we have previously discussed, there is substantial evidence that Chinese firms are obtaining Nvidia chips through illicit transshipment networks.
We lack, however, agreed upon measures of success here. And that opens the door to subjective interpretation. Specifically, interpretation by certain members of Trump’s inner circle that may be seeking to maximize a very different goal.
Transactional Foreign Policy
Neither Trump nor his closest advisors can reasonably claim to be objective stewards of export control policy. The New York Times has reported that David Sacks, Trump’s White House AI and Crypto Czar, has been pushing to reduce export controls while simultaneously retaining 449 AI-related investments.10 He has reportedly formed a close partnership with Nvidia CEO Jensen Huang, helping arrange a deal to export 500,000 advanced chips to the United Arab Emirates — generating an estimated $200 billion in sales — despite serious security concerns.11
Could the same interests be driving the H200 decision? The NYT’s reporting lends at least some plausibility to the theory:
In White House meetings, Mr. Sacks echoed Mr. Huang’s ideas that the best way to beat China would be to flood the world with American technology. Mr. Sacks worked to eliminate Biden-era restrictions on Nvidia and other American chip companies’ sales to foreign countries. He also opposed rules that would have made it difficult for foreign companies to buy U.S. chips for international data centers, five people with knowledge of the White House discussions said.12
Clearly Nvidia and other parties with financial exposure to the U.S. semiconductor industry stand to benefit from this “flood the world” thesis. That doesn’t necessarily mean it’s the incorrect strategy. Europe is currently scrambling to figure out how it can reduce its dependence on U.S. technology.13 And China is seeking to limit the import of H200s, a move interpreted by many as an attempt to promote domestic manufacturing while limiting dependence on foreign imports.14
But this is not exactly the stuff of grand strategy. A functional administration would be one that sets measurable objectives, manages conflicts of interests, speaks with one voice, and makes principles-based decisions. This is not where we’re at. Instead, we are witnessing U.S. economic statecraft on chaos mode. One where private interests rule and decision-making is arbitrary.
It is a system that closely reflects what Stacie Goddard and Abraham Newman have referred to as neo-royalism. The authors contend we are witnessing the emergence of a new international order centered around ruling cliques competing over material and symbolic goods. As they explain:
Neo-royalism…is not liberal cooperation, but instead is much closer to the type of collaboration practiced in oligarchic or mafioso systems and protection rackets. Leading cliques engage with local cliques in a process of distribution, in which they leverage threats, promises of access to the inner circle, or status recognition to maintain their hierarchical positions.15
The winning clique is clear: Nvidia, Trump’s inner circle, and the constellation of actors with a financial interest in U.S. semiconductors. The losers? It’s too early to tell what impact this will have on China’s efforts to win the AI race. But there is one person we can all spare a thought for: U.S. Attorney Ganjei. Carrying out economic statecraft is hard enough in normal times. It is nigh on impossible when the sands are always shifting beneath your feet.
Ibid.
Ibid, p. 19.
Ibid, p. 20.
Nvidia just tosses a few more million into the "ballroom fund", or the tRump "library" fund, or anywhere else tRump or his foul family can score some easy money, and BOOM!, a new chip export policy is midwifed.
Life in the corrupt lane.
One thinks that the depths of disappointment with the present US government have been reached - but there is always a lower rung of disappointment and distrust to climb down.