Trump admin opens new front in China AI contest with data center ban proposal

Sources close to the Trump White House have claimed that the administration is now working on a new set of rules to blacklist made-in-China components for anyone building a data center in America, according to Reuters.

The governments in Washington and Beijing have traded bans and restrictions to slow down the other in the race to lead AI technology over the past year. That standoff has now expanded to new fronts as data center gear could now join the growing list of items that have to be locally sourced for the AI buildout.

What AI components has the US banned from China?

Citing people familiar with the process, Reuters said that the United States’ Federal Communications Commission (FCC) is planning a proposal to close its borders to new Chinese-made optical transceivers.

An optical transceiver is a device that transmits data over fiber-optic cables running through data centers.

If the plan goes forward as planned, it will add to Cryptopolitan’s July report about the US ban on the importation of Chinese humanoid robots. There are already existing limitations on the use of Chinese models on government-issued devices.

Why is the US banning Chinese optical transceivers?

The paranoia in Washington goes to the possibilities of how foreign entities could compromise US-made frontier AI models if they are in the critical infrastructure that anchors their training.

The argument for the preemptive ban draws on real-life precedents of data theft, malware, or service disruption threats. 

Per Axios, two researchers found last year that anyone could remotely access cameras on China’s Unitree Robotics Go1 robot dogs via a pre-installed backdoor. Regulators were equally spooked by the proliferation of Chinese power inverters in the electrical grid powering American AI data centers.

A ban would disproportionately hit targets like Zhongji Innolight, which the Pentagon added to its list of firms with Chinese military ties in June. The firm controls roughly 27% of the global market for data center transceivers.

Even though it is still not a done deal, US makers like Coherent and Lumentum would be big winners if the ban lands as analysts project. Even though none of them have the capacity to meet current demand, domestic AI chipmakers were ironically pushed to quickly plug the gap that Nvidia’s forced exit left in the Chinese market.

Beijing warns of “all necessary measures”

China has not absorbed the pressure quietly. Its embassy in Washington criticized the proposed transceiver curbs and urged the US to stop targeting Chinese firms, warning that Beijing would take “all necessary measures” if its interests suffered material harm, StratNews reported.

The threats are not idle. China has already signaled it could retaliate over the robot ban by leaning on its control of rare-earth minerals that Western manufacturers struggle to source anywhere else.

Each new US restriction now tends to draw a Chinese counter, and a supply chain built over decades is being pulled apart one product category at a time.

The software fight is running in parallel

Hardware is only half the campaign. The administration has also weighed restricting Chinese open-weight AI models, and that push has met resistance from inside the US tech industry.

Meta CEO Mark Zuckerberg argued the US should out-build China rather than ban its models, telling an interviewer that better technology, not restrictions, keeps America ahead, Cryptopolitan reported. Startups have warned that cutting off cheap Chinese models would hurt American developers more than it hurts Beijing.

The smartest crypto minds already read our newsletter. Want in? Join them.