Donald Trump blocks 10% of funds for key agency in US-China tech race

By Mackenzie Hawkins

 

A White House move to cut 10 per cent of the funding for the agency responsible for semiconductor export controls risks undermining US efforts to stay ahead of China in the AI race, a group of Democratic senators warned.

 

The Trump administration on Monday effectively canceled $20 million in funding for the Commerce Department’s Bureau of Industry and Security, according to a statement from Democratic Senator Patty Murray, who sits on the chamber’s appropriations committee.  

 

The cuts are part of the White House’s latest attempt to unilaterally block federal spending enacted by Congress — in this case, $3 billion in total — and represent about 10 per cent of the budget for BIS, which writes and enforces rules governing shipments of American technology to China and other nations.

 

The decision drew sharp criticism from Capitol Hill, where lawmakers led by Senator Elizabeth Warren questioned Trump officials over the national security implications of the funding cuts. The president’s Office of Management and Budget, the senators wrote in a Wednesday letter to Director Russ Vought, “is in essence announcing to our adversaries that it is open season on US technology.”

 

The lawmakers asked OMB to immediately explain the legal rationale for the funding freeze and detail the impact it will have on BIS. An OMB spokesperson didn’t immediately respond to a request for comment. 

 

BIS is a pivotal agency in the US-China tech competition, with a remit that includes trade restrictions on advanced AI chips and the tools used to make them. The goal of the curbs, which began during President Donald Trump’s first term and ramped up dramatically under President Joe Biden, is to prevent China from developing advanced AI capabilities that could give Beijing a military edge. 

 

Commerce Secretary Howard Lutnick has vowed a significant increase in penalties for companies that violate those rules, and he recently imposed sanctions on dozens of Chinese firms for allegedly aiding Beijing’s military tech efforts. “We are committed to using every tool at the department’s disposal to ensure our most advanced technologies stay out of the hands of those who seek to harm Americans,” Lutnick said in a statement about the sanctions package.

 

Asked during his confirmation hearing about funding levels for BIS — where the budget has stayed fairly flat for a decade — Lutnick said that “proper resourcing is critical to our export control and enforcement regime.”

 

A spokesperson for the Commerce Department, which was also copied on the Wednesday letter, didn’t immediately respond to a request for comment.  

 

Since he took office, Lutnick has overseen the departure of several senior BIS officials. Agency staff for weeks stopped processing applications for export licenses — drawing significant frustration from a range of tech companies, people familiar with the matter said, though some approvals have resumed in recent weeks. A Commerce official said they are working to “resolve” the broader holds, according to the news site Export Compliance Daily.