Key Takeaways
The Trump administration is pursuing a four-year plan to achieve "meaningful independence" from China in key sectors including semiconductors and artificial intelligence, according to Treasury Secretary Scott Bessent, who says the goal is to "derisk but not decouple" the world's two largest economies.
"We have to derisk but not decouple," Treasury Secretary Scott Bessent said in an interview, outlining a strategy that balances continued trade with reduced dependence on China for critical technologies.
The policy focuses on three specific areas: critical minerals, medicines, and semiconductors. Bessent stated the process is "a step function every nine months and probably completely resolved in four years." This comes as the US has applied pressure through data controls and technology limitations, responding to China's restrictions on exports of rare-earth magnets.
The strategy underscores the administration's view of the technology competition with China as an urgent national security matter. Bessent warned, "If we don’t win in AI, then it’s game over," highlighting a timeline of "a year, maybe 18 months" to establish a definitive lead, with the US and China scheduled to discuss AI at a summit in Beijing next month.
Bessent described the administration's approach to China as a "recalibration" rather than a complete rupture. While trade in agriculture, energy, and financial services will continue, the focus is on building resilient, independent supply chains for technologies deemed vital to national security. This strategy will be tested at the upcoming summit between President Trump and Xi Jinping in Beijing, which Bessent says is about ensuring "stability" and keeping the relationship predictable, even as the U.S. takes steps to minimize Beijing's leverage.
The administration's view is shaped by a deep-seated mistrust of China's global ambitions. "They believe that they were the Middle Kingdom," Bessent said, adding that China "has never had allies. They have vassal states." This perspective informs the U.S. push to counter initiatives like the Belt and Road, which Bessent argues are driven by "hard-power reasons" in contrast to the "soft-power" motivations behind U.S.-led institutions like the World Bank and IMF.
The competition in artificial intelligence is the most urgent item on Bessent's agenda. He stated that a senior-level group meets weekly to monitor AI models and assess their vulnerabilities, concerned about misuse by criminals or hostile actors. The "ultimate threat," according to Bessent, is the potential for AI to be used to create a biological agent "10 times worse than Covid."
To mitigate these risks while fostering innovation, the administration is pursuing a mix of targeted regulations, such as controlling advanced chip exports, and a lighter touch that avoids stifling the industry. This approach is designed to ensure the U.S. stays ahead of China, which has made AI a core part of its national strategy, with 83 percent of Chinese companies using generative AI compared to 65 percent of American companies, according to the American Edge Project.
The push for technological independence is part of a broader industrial policy to reshore manufacturing capacity. This has led to significant investments in the U.S. semiconductor industry. Intel, for example, has ramped up chipmaking equipment orders by more than 50 percent year-over-year to start 2026 and is now in high-volume manufacturing of its 1.8nm 18A process node. The company's upcoming 14A node is being designed specifically for external customers, a move aimed at competing with foundry giant Taiwan Semiconductor (TSMC).
Nvidia, a leader in AI chip design, has made a $5 billion strategic investment in Intel, signaling a move to diversify its supply chain away from TSMC and the geopolitical risks associated with Taiwan. This emerging partnership could see Intel packaging and assembling Nvidia's advanced AI chips, providing a domestic alternative and strengthening the resilience of the U.S. semiconductor ecosystem. The U.S. government has also taken a nearly 10 percent stake in Intel, positioning the company as a cornerstone of national industrial policy.
This article is for informational purposes only and does not constitute investment advice.
