Microsoft has called in an open letter to the U.S. government to reconsider the strict AI export rules implemented during President Biden’s final days in office. The company argues that these restrictions, intended to control the distribution of AI chips, are counterproductive to U.S. economic interests and global competitiveness. Brad Smith, Microsoft’s president, criticised the AI Diffusion Rule, stating that it contradicts the Trump administration’s goals of strengthening American exports. He argued that limiting the sale of U.S.-manufactured AI chips, even to allied nations, weakens the country’s technological leadership and increases its already significant trade deficit.

“As written, the rule undermines two key priorities: maintaining America’s leadership in AI and reducing our near-trillion-dollar trade deficit,” Smith explained in a blog post. “If left unchanged, this policy could ultimately benefit China, allowing it to expand its AI capabilities in a way similar to how it gained dominance in 5G telecommunications a decade ago.”

Impact on U.S. Allies and AI Development

Smith highlighted that the rule places unnecessary obstacles on U.S. companies seeking to export AI technology to allied nations, including Switzerland, Poland, and India. Microsoft, which is investing $80 billion in global AI infrastructure this year alone, fears that these restrictions could push international partners toward alternative suppliers, potentially bolstering China’s position in AI development. The concern extends beyond immediate financial losses. If the U.S. fails to facilitate AI technology exports, countries looking to expand their AI capabilities may turn to competitors, reducing America’s influence in shaping global AI advancements.

Economic Risks and Global Infrastructure

According to Smith, the long-term economic consequences of the rule could be severe. He pointed out that as U.S. tech firms continue investing billions in AI-driven data centres worldwide, a rigid export policy could stifle their ability to build global supply chains. “The impact isn’t just on Microsoft—it affects the entire U.S. economy and its ability to maintain technological leadership,” he emphasised.

Proposed Changes to the AI Diffusion Rule

Smith urged policymakers to rethink the current approach and introduce revisions that balance national security with economic growth. He proposed simplifying the extensive 41-page rule, expanding export exceptions for allied nations, and removing caps on AI chip exports while maintaining necessary security measures.

“If the U.S. wants to remain competitive with China in AI, we need policies that empower American companies to bring cutting-edge technology to like-minded nations,” Smith said. “We’re ready to invest—the government just needs to create an environment that allows us to do so.”

The Future of U.S. AI Policy

As AI continues to shape the global economy, industry leaders like Microsoft are urging policymakers to take a more strategic approach to regulation. Whether the former US President's administration will respond to these concerns remains to be seen, but the debate highlights the ongoing struggle between ensuring national security and fostering innovation in the rapidly evolving AI landscape.