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The original was posted on /r/wallstreetbets by /u/s1n0d3utscht3k on 2024-07-17 03:58:36+00:00.

The Biden administration, facing pushback to its chip crackdown on China, has told allies that it’s considering using the most severe trade restrictions available if companies such as Tokyo Electron Ltd. and ASML Holding NV continue giving the country access to advanced semiconductor technology.

Seeking leverage with allies, the US is mulling whether to impose a measure called the foreign direct product rule, or FDPR, said people familiar with recent discussions. The rule lets the country impose controls on foreign-made products that use even the tiniest amount of American technology. 

Such a step — seen by allies as draconian — would be used to clamp down on business in China by Japan’s Tokyo Electron and the Netherlands’ ASML, which make chipmaking machinery that’s vital to the industry. The US is presenting the idea to officials in Tokyo and the Hague as an increasingly likely outcome if the countries don’t tighten their own China measures, according to the people, who asked not to be identified because the deliberations are private.

Those rules have had a far-reaching impact. They’ve taken a quantifiable toll on Chinese companies such as Huawei Technologies Co. and Semiconductor Manufacturing International Corp., making it harder for them to get key supplies and equipment.

Applied Materials Inc., Lam Research Corp. and KLA Corp. — the three biggest American makers of chip equipment — have been pressing their case in a series of recent meetings with US officials, according to people familiar with the situation. They have argued that current trade policies are backfiring, damaging American semiconductor companies while failing to halt Chinese progress as much as the US government hoped.