Trump Launches a Digital Trade War with China

The United States stands on the brink of a new phase in its technological confrontation with China.

According to multiple sources within U.S. government circles, the Trump administration is considering broad restrictions on the export of software and other products with American origins. The move would be a direct response to China’s recent decision to impose export limits on rare earth minerals, which are vital for the production of semiconductors, batteries, and high-end electronics. If approved, Washington’s plan could ripple across the global tech industry, affecting everything from jet engine development to everyday consumer electronics like laptops and smartphones.

Retaliation for China’s Rare Earth Restrictions Three sources familiar with the matter confirmed that the proposed restrictions are part of a wider strategy President Donald Trump outlined earlier in October.

At the time, Trump warned that the United States would block exports of critical software and components if China continued to “threaten American interests” in global markets. Days later, Trump announced an additional 100% tariff on Chinese goods, triggering strong reactions in financial markets and among U.S. tech executives.

While White House officials have declined to specify details, the uncertainty surrounding export controls has already sparked anxiety across the technology sector. “Everything you can imagine — from airplanes to smartphones — relies on U.S. software,” said one government adviser on condition of anonymity.

Bessent: “Everything Is on the Table” Treasury Secretary Scott Bessent confirmed at a White House briefing that Washington is reviewing a wide range of options, including coordination with G7 partners. “It could involve software, engines, or other advanced technologies — nothing is off the table,” Bessent said. Economic analysts warn that the restrictions could also harm U.S.-based companies, many of which have supply chains deeply integrated with Chinese partners.

According to Emily Kilcrease of the Center for a New American Security, this is “a potentially powerful but extremely risky tool.” “It’s possible the administration is simply testing the market’s reaction,” Kilcrease noted. “Actually enforcing such controls would be complex — and could end up hurting U.S. firms more than Chinese ones.”

Market Reactions Turn Volatile The announcement of potential export restrictions rattled Wall Street.

The S&P 500 closed down 0.5%, while the Nasdaq fell 1% before recovering part of its losses later in the session.

Investors fear that expanded export controls could disrupt global supply chains and slow down innovation. “Markets are nervous that a new tech war could freeze R&D investments worldwide,” said an analyst at Goldman Sachs.

China Warns of “Firm Countermeasures” The Chinese Embassy in Washington responded swiftly, calling the U.S. plans “unilateral and illegitimate actions” that would violate international trade rules. “If the United States insists on going down this wrong path, China will take firm countermeasures to protect its legitimate rights and interests,” said the embassy spokesperson. Diplomatic sources suggest that China could retaliate by further restricting exports of critical materials, including graphite, cobalt, and lithium — key components for batteries and semiconductor manufacturing.

The Digital Front of a New Cold War The debate over export controls underscores how the U.S.-China technological rivalry is rapidly evolving into a digital cold war.

Following previous bans on Nvidia chips, AI processors, and advanced semiconductor technology, software has now become the next strategic battleground. Still, some officials suggest the Trump administration may be signaling intentions rather than acting immediately. “Sometimes the threat itself is the message,” said one U.S. diplomat. “If China takes it seriously, that alone could be more powerful than an actual embargo.”

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