US considers new software export curbs on China, threatening global tech supply chains

The US government is reportedly considering new export controls that could block a wide range of products made with US software from being shipped to China, in what could become one of Washington’s most sweeping trade measures to date.

If implemented, the move could disrupt global technology supply chains and heighten uncertainty for multinational manufacturers that rely on US-developed software across their operations.

The proposed curbs are part of a broader plan to retaliate against Beijing’s new restrictions on rare earth exports, deepening tensions between the world’s two largest economies, according to a Reuters report.

The plan, still under discussion, would extend existing export control frameworks to cover items made anywhere in the world using US-developed software. That could include products as varied as laptops and jet engines, the report said.

The proposal comes as the Trump administration signals a tougher stance on China ahead of a planned meeting between President Donald Trump and Chinese President Xi Jinping later this month.

Washington appears to view software as a key point of leverage in its economic rivalry with Beijing, while China continues to dominate the global supply of rare earth elements critical to electronics manufacturing.Analysts say the move underscores a growing shift in the ongoing technology Cold War, where previous hardware and manufacturing export controls have already begun to split global supply chains into competing blocs.

“With software being the cornerstone from design, development to management of hardware systems globally, further tighter export controls will escalate and accelerate this dichotomous trend further,” said Neil Shah, VP for research at Counterpoint Research. “Most of the major and advanced EDA design tools, compute designs, software stacks, and operating systems come from US-based companies. So, the reliance is high, but building a parallel software ecosystem is costly, unwarranted, and could create some serious challenges.”

In May, Washington had already tightened oversight of electronic design automation (EDA) software sales, requiring leading vendors such as Cadence, Synopsys, and Siemens EDA to obtain export licenses before selling to Chinese firms. Earlier this month, President Trump announced on social media that he plans to double tariffs on Chinese exports to the US and introduce new export restrictions on what he called “critical software” by November 1.

Impact on supply chains

Analysts point out that the restriction will introduce further fragmentation into the tech supply chain and add additional compliance requirements to US-based enterprises. More importantly, it will severely impact the revenue of major Western tech firms that have been relying on China for growth, according to Lian Jye Su, chief analyst at Omdia.

This move also exposes a deep structural risk in the way modern manufacturing has evolved, said Sanchit Vir Gogia, chief analyst at Greyhound Research.

“Every complex product today, from a car, turbine, and network router to a chip, passes through design and automation tools built with American code,” Gogia added. “Removing those dependencies isn’t simply a matter of switching vendors; it requires rethinking the entire digital backbone of product development.”

For multinational manufacturers, the challenge is not ideological but logistical. Companies may need to prove that no part of their design, production, or supply processes relies on US-developed software at any stage. Experts say such an audit would be nearly impossible to execute at scale, and even compliant goods could end up in regulatory limbo, disrupting trade and production.

“This will have a significant impact on both the supply and demand sides, from lack of compatibility and standardization to intellectual property conflicts, complex distribution controls, and compliance challenges for enterprises and end customers,” Shah said. “This will definitely limit the global scale of US-based companies, not only in China but potentially in other markets.”

Broader implications

The outcome remains uncertain, but using software as a tool of strategic leverage in global trade carries significant risks and could have lasting repercussions for the US’s leadership in the global technology ecosystem.

“Such measures risk eroding US influence in global software ecosystems over time,” said Prabhu Ram, VP of industry research at Cybermedia Research. “MNCs may need to restructure operations to ensure compliance and mitigate legal risks. Historical precedent with semiconductor and design tool export controls underscores that industry players in China and the US will rapidly pursue domestic innovation, diversify sourcing, and accelerate the adoption of alternative technologies.”

Gogia pointed out that the recent trade controls on semiconductors and electronic design tools have revealed a consistent pattern: every short-term restriction yields a long-term workaround.

“The potential restrictions could accelerate China’s push for technology self-reliance,” said Charlie Dai, VP and principal analyst at Forrester. “For US enterprises and software vendors, compliance complexity and market access risks will rise, and it will potentially weaken their global competitiveness.” For enterprises, experts say the focus must now shift toward building more resilient and transparent supply chains, while reinforcing strategic software leadership to navigate the growing wave of regulatory and technological uncertainty.