The dance between the US and China is growing stranger by the day. Geopolitics is everywhere. To realign with the US, Mexico has raised tariffs on certain Chinese imports to 50%. To send the US a message, China has not bought a single metric of American soybeans for the first time in 20 years (as 95% of China’s demand is being supplied by Brazil). To shield against the US, global investors have poured $100 billion into Asia in the last nine months, challenging the idea that money is going to America first and the rest of the world second.
Now, adding to the strangeness, China has reportedly dangled $1 trillion in investment pledges in the US, if Washington meets its conditions—many of which go beyond the economic arena (i.e., the US no longer supporting Taiwanese independence or arming the island nation).
TECH TENSIONS
This is the state of play between the world’s two largest economies. A strange love-hate relationship. But it is with technology that the biggest shift—or disruption— could soon occur, raising volatility to new heights.
A new report from the National Institute of Standards and Technology (NIST) and the US Department of Commerce labels Chinese AI models, like those from DeepSeek, as threats to national security. It comes months after DeepSeek hit the spotlight and US congressional members called for a ban on the AI system from government devices. In tandem with all this, in July, a new memo found that the US was actively “testing” Chinese AI systems and ranking them based on their ideological bias—how close their answers were to the positions of the Chinese Communist Party (CCP). This could then set the basis for bans.
The latest report from NIST, coupled with continued friction between the US and China, raises the chances that Washington could ban Chinese AI within the American economy.
AI DECOUPLING
Put differently, what I refer to as an “AI decoupling” is forming on the horizon. In such a situation, the US and China would begin to restrict each other’s AI systems in their home markets (and in other countries). Of course, several US AI firms have already limited China’s access to their AI services, including Anthropic, which will not sell its AI to companies that are more than 50% owned by China, placing geopolitics at the center of global investment.
An AI decoupling builds on the latest tech moves the US and China have been making, including the US banning the delivery of certain equipment to China for use by companies like Samsung, and China telling its local companies to stop banning Nvidia chips. Tied to this is China’s rapid self-reliance drive, driven by firms like Huawei, SMIC, and DeepSeek, all of whom are developing homegrown chips to replace US offerings.
And tertiary deals that helped stabilize the US-China relations are also falling apart. The deal inked by the US and the UAE earlier this year, for instance, where America would export hundreds of thousands of chips in exchange for Emirati investment, has effectively stalled. This deal sought to move America away from its previous policy, where Arab states had restricted access to US chips over their “accessibility” to China. If the deal completely falls through, the old chip limits could re-emerge in the Middle East.
GLOBAL FRACTURING
Should America ban Chinese AI, it would fracture the globe along AI lines. This would accelerate “vertical globalization”—globalization full of walls and barriers.
America would be walling itself off from China in a new way. The effects would ricochet throughout the global economy. In China, a spectrum of old and new companies—including investors— will have to rethink everything if access to America is no longer guaranteed. Outside of China, countries will read the tea leaves: an AI ban means US-China trade talks have failed and fighting is about to resume, starting with a Chinese retaliation. The Chinese might reweaponize rare earth supply chains, restrict investment in the US market, or even introduce a tit-for-tat ban on an American platform in China.
Equally important is what an AI decoupling signals. The world is reaching a point where technology is no longer integrating nations; it is dividing them—a crux of vertical globalization. What starts as a ban on AI could quickly snowball into other limits on Chinese technology or from other nations America is annoyed with. And, as many question whether an “AI bubble” is forming, a US AI ban could either burst the bubble or expand it.
TECH > TARIFFS
The AI decoupling storm has not yet arrived. But this is a card now on the table, and one that is likely to be played if the situation between the US and China does not improve fast. In reality, the Chinese demands, in particular around restarting US tech exports and changing America’s position on Taiwan, require Washington to reverse decades of geopolitics, in exchange for what?
As the globe frets about new US-China tariff fights, it is technology where the real battle is being waged. In this, the era of export controls may be ending, and the era of blanket bans, AI decouplings, and digital iron curtains may be about to begin. And, while today, it may be the US decoupling from Chinese AI, tomorrow, it could be others decoupling from American AI.
-ABISHUR PRAKASH AKA. MR. GEOPOLITICS
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