The U.S. dominates artificial intelligence—but that creates a dilemma. Preserving America’s technological edge requires winning global market share through trade, but the export of advanced AI chips risks strengthening adversaries like China.
Export controls that balance these priorities and limit China’s access to computing power can be vital for national security. But in Congress a different kind of export measure is being advanced under the guise of national defense. The GAIN AI Act would give U.S. buyers a 15-day right of first refusal on advanced AI chips that companies like Nvidia and AMD propose to sell abroad. The measure, which has bipartisan support and is now part of the Senate’s national defense authorization bill, claims to enhance innovation and national security.
The truth is that it severely undermines both. The Senate bill would significantly restrict American AI chip exports. A newer House version whittles this down to 23 countries. But regardless how many countries are targeted, the legislation would leverage export controls to dictate the terms on which U.S. producers do business with U.S. buyers. That is a fatal flaw.
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The act is essentially a government-sponsored buyers’ cartel, inflating supply and reducing prices for AI chips domestically, while restricting supply and raising prices abroad. It allows any U.S. buyer to delay Nvidia or AMD sales overseas. By requiring disclosure of producers’ confidential pricing and customer data, it would effectively allow buyer-side price collusion under government protection. American exporters would face red tape, while Chinese rivals gain access to both market intelligence and the chance to outbid U.S. firms.
The bill’s sponsors cite national security, but this is really industrial policy. Under measures like GAIN AI, marginal costs will rise for the U.S. and fall for China, drying up investment. Any benefits for U.S. buyers will be short-lived as their suppliers lose out to Chinese competitors.
We’ve seen this dynamic before. The crude oil and liquefied natural gas export bans of the 1970s suffocated U.S. energy investment and turned America into a major energy importer. When those bans were finally lifted in 2015 and 2016, U.S. production surged.
The bill’s proponents also cite a shortage in computing capacity. But the real bottleneck is in data centers, not chips. If you can’t build data centers fast enough, Microsoft CEO Satya Nadella said in a podcast interview, then “you may actually have a bunch of chips sitting in inventory that I can’t plug in. In fact, that is my problem today. It’s not a supply issue of chips.” Data centers are running into the same regulatory obstacles that have driven so much manufacturing offshore. Overregulation is America’s great disadvantage in the tech competition with China. That is where Congress should focus.
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If this bill were really about national security, it would ban GPU exports to target countries entirely, not just make them relatively cheaper in America. But that would ban exports the president has already judged to pose no security risk—a dangerous encroachment on the president’s foreign-affairs power.
It is crucial that the president retain control over AI export policy. Congress gave him that flexibility under export-control laws, in part because as adversaries develop competitive substitutes for general-purpose technologies, export controls lose much of their value, so they must be continuously calibrated.
But GAIN AI has no such guardrails. That’s a problem, because China is rapidly indigenizing the AI supply chain, so that export controls will hurt China less and America more over time. The act will also be hard to repeal once in place. Look at the Jones Act, which is still on the books decades after ruining the oceangoing shipbuilding industry that it was supposed to protect.
As President Trump said when he announced his AI Action Plan, we “will never forget that the greatest threat is to forfeit the race and force our partners into rival technology.” Yet that is precisely what GAIN AI risks doing—and it could help make China the dominant provider of AI to the world.
