Everyone is talking about Trump’s new tariffs, but what does the second Trump administration actually have planned in the area of U.S. (re-)export controls and embargoes? While the discussion around U.S. tariffs dominates media attention, concrete, and likewise far-reaching, changes are emerging in the field of U.S. (re-)export controls and embargoes, changes that are likely to have significant consequences for globally operating companies.
The key points in brief: One thing seems certain: U.S. (re-)export controls and sanctions will continue to tighten. This has already been the trend in recent years, in particular with the Foreign Direct Product (FDP) rules. But the scale now appears to be of a different order: with China, Iran, and, as yet unclear, Russia in the crosshairs of enforcement efforts, and an expansion of controls to key technology areas such as AI, quantum computing, hypersonic technology, and semiconductors, as well as to military and intelligence end uses and end users, globally operating companies need to prepare for a stricter regulatory environment, including for goods manufactured abroad. Further FDP rules, and correspondingly strict interpretations by BIS, are to be expected, drawing the compliance framework very tightly, even, on the wording of the EAR, too tightly, for foreign companies as well. Aggressive action has been announced against those seeking to profit from selling sensitive technologies to U.S. adversaries, with a “dramatic increase” in enforcement action and fines. Also worth noting from an EU perspective: all foreign transaction parties to BIS licence applications are now to be screened (even more robustly) against intelligence data. Given the announced 12% cut to BIS’s budget, all of this is likely to pose a considerable challenge for BIS staff as well.
1. The America First Trade Policy memorandum and the BIS Update Conference in late March
On 20 January 2025, his first day in office, Trump issued a memorandum on America First Trade Policy, calling for a comprehensive review of the U.S. export control system in light of developments concerning strategic adversaries or geopolitical rivals, as well as all other relevant national security and global considerations. In particular, recommendations are to be made on how to preserve, secure, and expand the United States’ technological edge, and on how to identify and close loopholes in existing export controls, in particular those enabling the transfer of strategic goods, software, services, and technologies to strategic rivals and their proxies. In addition, the review is to assess the enforcement of export control policies and practices, as well as enforcement mechanisms, and to make recommendations for creating incentives for compliance by foreign countries, including appropriate trade and national security measures (see https://www.whitehouse.gov/presidential-actions/2025/01/america-first-trade-policy). The report reviewing the U.S. export control system, due under the memorandum by 1 April 2025, does not appear, as of the time of writing (3 April 2025), to have been published yet.
At the 37th “Update Conference on Export Controls and Policy,” held by the Bureau of Industry and Security (BIS) in Washington, D.C., from 18 to 20 March 2025, Commerce Secretary Lutnick heralded a new era of aggressive, extraterritorial enforcement of export controls in pursuit of U.S. national security objectives, singling out China as the primary adversary and threat to U.S. technological leadership.
2. The new direction of U.S. export control policy
According to the new BIS chief, Jeffrey I. Kessler (not a “BIS insider,” but previously a partner at the large law firm WilmerHale), BIS will end its work within the U.S.-EU Trade and Technology Council, as part of a broader effort to withdraw from traditional export control dialogues with allies. In a closed-door session with BIS officials, he is also reported to have said that the agency plans significantly to step up enforcement of export controls against China, and to have urged officials to limit engagement with industry. It remains unclear whether existing export controls against Russia will be maintained (see https://exportcompliancedaily.com/article/2025/03/31/us-to-shun-export-control-dialogues-seek-massive-increase-in-china-penalties-bis-chief-says-2503280039).
At the aforementioned BIS Update Conference, Commerce Secretary Lutnick set out a number of notable markers for the future direction of U.S. export control policy: Lutnick announced aggressive action against those seeking to profit from selling sensitive technologies to U.S. adversaries, together with a “dramatic increase” in enforcement action and fines for violations of the Export Administration Regulations (EAR) (see https://foreigninvestmentwatch.com/bis-at-commerce-expected-to-ramp-up-export-control-enforcement).
2.1 A further tightening of the export control policy already intensified under Biden
This marks a significant tightening of the export control policy already intensified under the Biden administration, most recently through, among others:
- the Semiconductor Manufacturing Equipment (SME) (15 CFR 734.9(k) EAR) of 7 October 2024, which, from a U.S. perspective, controls goods manufactured abroad for semiconductor manufacturing that are based on U.S. technology and intended for certain end uses, in order to limit China’s use of advanced semiconductor manufacturing technologies, and
- the AI Model Weights FDP Rule (15 CFR 734.9(k) EAR), published on 15 January 2025 (entry into force: 13 January 2025; compliance required from 15 May 2025), which, from a U.S. perspective, controls model weights of advanced AI models manufactured abroad that were trained using U.S. technology and involve more than 10^26 computational operations, in order to guard against the diffusion of advanced AI technologies.
2.2 Technological priorities
At the Update Conference, BIS leadership emphasised, across several panels, that it will prioritise the following areas, classified as particularly critical to U.S. national security, with particular attention to their acquisition by China and Iran:
- Quantum computing
- Artificial intelligence (AI)
- Hypersonic technology
- Semiconductors
- Military and intelligence end uses and end users (see https://www.gibsondunn.com/bis-update-conference-takeaways-expect-dramatic-increase-in-export-controls-enforcement-against-us-adversaries)
2.3 China as the primary focus of export control policy
China was at the centre of the 2025 BIS Update Conference. Lutnick is reported to have pointed to the recent success of the Chinese AI model DeepSeek as evidence of China’s continued efforts to circumvent U.S. export controls and to use U.S. chips for its AI technology, and to have expressed concern, using the Panama Canal as an example, about the growing influence of Chinese capital.
Although the Biden administration had already overseen aggressive enforcement of export controls against China, underscored by a record $300 million penalty imposed in April 2023 for violations of the Foreign Direct Product Rule applicable to Huawei (see https://www.strtrade.com/trade-news-resources/str-trade-report/trade-report/april/record-penalty-imposed-for-export-violation), Lutnick called for a concerted effort to combat what he described as the possibility of “a controlled communist future.” Lutnick described China as the primary geopolitical and economic adversary of the United States and emphasised BIS’s role as the “front line” in protecting core U.S. technologies. Export controls are also to be incorporated into trade negotiations, in order to assess the political alignment of trading partners (see https://www.foleyhoag.com/news-and-insights/blogs/white-collar-law-and-investigations/2025/march/bureau-of-industry-and-security-2025-update-conference-on-export-controls-and-policy).
Speculation nonetheless continues, most recently by Jude Blanchette in Foreign Affairs (https://www.foreignaffairs.com/china/chinas-sees-opportunity-trumps-upheaval), that a possible “grand bargain” between Trump and Xi could include an easing of U.S. export controls. Such a deal, however, is likely to be unstable and difficult to implement, given the mistrust involved and Trump’s at times erratic policymaking.
China’s access to AI and semiconductor technologies can only be restricted jointly
In the panels, BIS representatives pointed to China’s significant increase in military spending for the People’s Liberation Army (PLA) and warned of China’s publicly stated goal of achieving military modernisation by 2027. These military investments, they noted, extend beyond traditional armaments to intelligent warfare, AI, quantum computing, and other advanced technologies (see https://www.gibsondunn.com/bis-update-conference-takeaways-expect-dramatic-increase-in-export-controls-enforcement-against-us-adversaries).
Well worth reading, for background, is a report by the Center for Strategic and International Studies (CSIS), a Washington, D.C.-based think tank specialising in global security, economic, and political issues: while the United States has, since 2022, introduced comprehensive controls, allies such as the EU, the Netherlands, Germany, Japan, South Korea, and Taiwan have, to date, considerably more limited powers and instruments at their disposal. In particular, they lack equivalents to U.S. tools such as the Foreign Direct Product Rule, the Entity List, and China-specific restrictions. The report emphasises that the U.S. strategy cannot succeed without allies, since they control key parts of the semiconductor value chain (see https://www.csis.org/analysis/understanding-us-allies-current-legal-authority-implement-ai-and-semiconductor-export). A formal economic alliance for jointly planning and implementing sanctions against China is, in this connection, also called for by Brooks and Vagle in a recent Foreign Affairs piece (https://www.foreignaffairs.com/united-states/real-china-trump-card-brooks-vagle), while not neglecting the point that a comprehensive economic decoupling from China in peacetime could be strategically disadvantageous, since it would reduce U.S. leverage in the event of a crisis.
2.4 New enforcement tools and/versus multilateral cooperation
At the aforementioned Update Conference, BIS staff highlighted that they are deploying new tools to enforce export controls. Since July 2024, for example, BIS has begun adding addresses posing a high risk of diversion to the Entity List. Of particular note from an EU perspective: all foreign transaction parties to BIS licence applications are now to be screened (even more robustly) against intelligence data.
The unilateral measures described above stand in notable contrast to BIS staff’s emphasis on the continuing importance of multilateral enforcement efforts: despite an “America First” orientation, international cooperation, it was said, remains a central component of effective export controls (see https://www.foleyhoag.com/news-and-insights/blogs/white-collar-law-and-investigations/2025/march/bureau-of-industry-and-security-2025-update-conference-on-export-controls-and-policy). It remains to be seen how this balancing act is to be achieved.
2.5 Funding challenges
In a letter to the Office of Management and Budget (OMB) dated 26 March 2025, U.S. senators criticised OMB’s decision to withhold $20 million in emergency funding for BIS, equivalent to a 12% cut to BIS’s budget (see https://www.banking.senate.gov/imo/media/doc/20250326%20FINAL%20Letter%20to%20OMB%20re%20BIS%20Funding%20v2.pdf). The senators warned that, if not reversed, this decision would “wreak havoc at one of our most important national security agencies.” They argued that BIS already operates on a tight budget, and that this funding freeze would undoubtedly impair the essential activities BIS undertakes to keep our technology out of the hands of foreign adversaries.
3. Sanctions policy under the new administration
3.1 Iran: restoring “maximum pressure”
On 6 February 2025, the U.S. Treasury announced that it would exert “maximum pressure” on Iran by imposing new economic sanctions on the Iranian oil industry. The new restrictions target an international network of tankers transporting oil from Iran to countries such as China, with the proceeds used by the Iranian government to fund the development of nuclear weapons (see https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-restores-maximum-pressure-on-iran). BIS leadership supports this “maximum pressure” campaign against Iran and is prioritising cooperation with the Department of Justice to pursue diversion cases involving Iran (see https://www.gibsondunn.com/bis-update-conference-takeaways-expect-dramatic-increase-in-export-controls-enforcement-against-us-adversaries).
3.2 An uncertain stance with regard to Russia
While BIS has recently highlighted, in particular, diversion networks based in Hong Kong and China alleged to be smuggling controlled items to Russia for use on Ukrainian battlefields, few concrete plans for enforcing export control violations connected with Russia have, at the same time, been discussed for 2025, possibly owing to the uncertainty surrounding the ongoing, U.S.-brokered peace talks between Russia and Ukraine (see https://www.gibsondunn.com/bis-update-conference-takeaways-expect-dramatic-increase-in-export-controls-enforcement-against-us-adversaries).
3.3 Reversal of recently announced sanctions relief towards Cuba
A further example of the Trump administration’s tightened sanctions policy is its treatment of Cuba. Although Biden had announced, on 14 January 2025, that Cuba would be removed from the State Department’s list of “State Sponsors of Terrorism” (SSoT), that decision never entered into force. This was due to the statutory 45-day waiting period, during which Congress could intervene. Before that period had even expired, the decision was revoked by Trump on 20 January 2025, meaning Cuba continues to be designated as a state sponsor of terrorism (see https://www.hklaw.com/en/insights/publications/2025/01/trump-administration-rescinds-certain-actions-by-the-previous-admin). A tougher stance towards Cuba is therefore likewise to be expected.
4. Conclusion
Since the new administration, on the one hand, repeatedly emphasises that effective enforcement of controls can only succeed together with allies, while, on the other hand, evidently intending to act increasingly unilaterally, and without regard for the interests of its (former) allies, it will pose a particular challenge for policymakers in Germany and the EU to assert their own tangible strategic interests. Critics counter that the U.S. strategy will, in the medium to long term, lead to a “lose-lose scenario” for the United States: declining U.S. exports, and the resulting gaps in the world market, which other countries could exploit, for example, to advance their own semiconductor industries. Combined with what some observers have identified as an emerging brain drain of highly skilled professionals, scientists, and academics, this development could have significant consequences for U.S. innovation and competitiveness.
