Intentionally or not, outgoing President Joe Biden just handed incoming President Donald Trump and his Big Tech allies a powerful weapon in the fight against European tech regulation.
Just a week before the transition, the Biden administration on Monday unveiled an interim final rule (a type of emergency rule that is issued before industry can give its opinion) that will limit the flow of advanced AI chips from U.S. companies to all but 18 close U.S. allies. The move is largely designed to close loopholes in American efforts to stymie Chinese AI progress, by making it harder for Beijing to acquire cutting-edge U.S. hardware through third countries.
Some EU countries, such as Germany and France, are on the privileged top-tier list. But many, including key U.S. allies such as Poland and the Baltic states, are not, meaning they will face AI-chip import caps that can only be raised through negotiations with Washington.
In a Monday statement, European Commission tech chief Henna Virkkunen and trade chief Maroš Šefčovič said they were “concerned” about the measures.
“We believe it is also in the U.S. economic and security interest that the EU buys advanced AI chips from the U.S. without limitations: we cooperate closely, in particular in the field of security, and represent an economic opportunity for the U.S., not a security risk,” the commissioners said. “We have already shared our concerns with the current U.S. administration and we are looking forward to engaging constructively with the next U.S. administration.”
As with many policy issues, it is far from clear what Trump will do with Biden’s latest AI-chip restrictions when he takes power next week — the rule can’t be enforced for 120 days, so he has plenty of time to intervene if he wishes. But according to Matthew Eitel, chief of staff at the D.C.-based Center for European Policy Analysis, “there is a lot for President-elect Trump to like in this rule.”
“The tiered-access system provides the U.S. leverage to demand concessions from countries seeking expanded access to U.S. AI tech — and the leverage to restrict a country’s access if they do not agree to U.S. demands,” Eitel told Fortune.
When it comes to the EU, there is every likelihood that those demands will relate to tech regulation — a major bugbear for U.S. tech leaders such as Elon Musk and Mark Zuckerberg, who have rallied around the incoming president and expect him to fight for them on the international stage.
Rule vs regulation
EU tech laws like the General Data Protection Regulation (GDPR) have long annoyed Silicon Valley, but two recent additions have sparked more outright confrontation: the Digital Markets Act (DMA), which imposes major antitrust obligations on the largest tech firms, and the Digital Services Act (DSA), which covers the moderation of online content. The EU also recently adopted the world’s first comprehensive AI Act, which establishes many rules around the training and deployment of AI models. (The GDPR also has a big impact on the AI sector, as it limits the personal data that can be used for training.)
One crucial aspect of the EU’s newest tech laws is that they give the European Commission itself the role of enforcer. This decision was partly down to Europe’s experience with patchy enforcement of the GDPR by often-underfunded national privacy authorities, but it also has the effect of ensuring that the DMA, DSA and AI Act are applied by a political body that is sensitive to shifting geopolitical tides.
Meta’s CEO seems particularly aware of this fact. Zuckerberg, who last week weakened the Facebook and Instagram content moderation that has so irked Trump and his supporters, has openly called for the returning president to stop the EU from fining U.S. tech firms for antitrust and other violations. He told podcaster Joe Rogan on Friday that these fines were “almost like a tariff” on the sector. (Meta itself is currently appealing an $839 million EU antitrust fine relating to Facebook Marketplace.)
“I think it’s a strategic advantage for the United States that we have a lot of the strongest companies in the world, and I think it should be part of the U.S. strategy going forward to defend that,” Zuckerberg said. “And it’s one of the things that I’m optimistic about with President Trump.”
It is possible that the European Commission is already preparing for such a clash. The Financial Times reported late Monday that the Commission was “reassessing” an array of live DMA investigations into Meta, Apple and Google.
“It’s going to be a whole new ballgame with these tech oligarchs so close to Trump and using that to pressurize us,” an unnamed senior EU diplomat told the British newspaper. The Commission denied that there were any delays in finalizing the cases, “especially not due to any political considerations.”
Musk, who bankrolled Trump’s campaign and is one of his closest allies, is in a different situation — particularly since he recently started interfering in EU politics with targeted efforts to promote the far right. The Commission has already charged his X platform with DSA violations, and Virkkunen told Bloomberg on Monday that it is now even considering expanding its investigation into X’s light-touch content moderation.
Doing more with less
It is unlikely that Biden intended to give his successor ammunition to act against EU tech regulation. Indeed, the Biden administration moved to bring the U.S. closer to the EU position in some respects, particularly regarding Big Tech antitrust.
According to CEPA’s Eitel, by introducing its last-minute AI-chip rule the Biden administration was “rolling the dice that President-elect Trump’s team will agree with their prescription for how the U.S. can beat China in the race to lead the world in AI.”
“The Biden administration made China-focused export controls a central pillar of its foreign policy since late 2022,” Eitel said. “It is clear the Biden administration views the [new export framework] as a legacy-defining capstone of their efforts.”
Many observers, including those in the chip industry, warn that placing further restrictions on U.S. exports could ultimately drive customers in some second-tier countries into the arms of China’s chip sector.
“The new rule risks causing unintended and lasting damage to America’s economy and global competitiveness in semiconductors and AI by ceding strategic markets to our competitors,” said John Neuffer, president and CEO of the Semiconductor Industry Association.
Eitel argued that previous U.S. export controls, particularly those on advanced chipmaking equipment, made that an unlikely development at this point. Pointing to the reported impact of those restrictions on Chinese chipmaker Huawei and its contract manufacturer SMIC, Eitel said that “if Huawei cannot satisfy domestic demand right now, it is hard to see them competing with Nvidia and AMD globally in the short term, and the new framework won’t change the reality of Huawei and SMIC’s manufacturing headaches.”
However, Eitel warned that the U.S. industry’s fears could yet be realized, as Chinese AI startups like DeepSeek bring out models that (they claim) do not require the training horsepower that only comes with the latest U.S. chips.
“In the long run, the [new rule] could tilt the dynamics of the global AI market in China’s favor if it is not implemented properly,” he said. “China’s AI industry is learning how to do more with less. If Chinese firms continue innovating high-quality AI models that do not need access to high-quality chips, there could be a future where Beijing supports their deployment of these models, alongside Chinese chips, in countries facing U.S. caps on AI hardware.”
