Who Pays When Beijing Walks Away With American Tech?
Washington is debating how to respond when Chinese buyers seek U.S. technology that matters to national security. The instinct to tax foreign buyers or claim a share of the proceeds is a tempting short cut. But taxes are not the same as safeguards.
If letting China buy precious tech is detrimental to U.S. interests, that threat is not mitigated by allowing the Treasury to grab a quarter of the income.
Treating national security risks as a revenue problem lets market access substitute for control. You can’t fix a strategic transfer with a fiscal bandage. The Treasury taking a cut might look like leverage, but it leaves the core danger untouched.
Private investment decisions respond to rules, not just price tags, and clear rules matter more than ad hoc levies. Firms facing the risk of losing their IP to state-directed competitors will avoid deals that expose sensitive know-how. Predictable, enforceable restrictions protect both firms and national security in a way a one-time tax cannot.
Republicans have long favored strong defenses against tech transfer to strategic rivals, not complicated tax swaps that reward the risk. Defense-minded policy means stopping transfers before they happen, not monetizing them after the fact. The goal must be to preserve capability and deny advantage to competitors.
Targeted export controls and tighter investment screening do the work a Treasury grab cannot. Those tools identify what matters and stop sales to actors who would weaponize the technology. They are cordons that protect critical sectors rather than revenue schemes that normalize the sale.
A quarter-of-the-income seizure also risks distorting markets and pushing deals into murkier channels. When buyers face punitive fiscal penalties, they seek ways around the rules, using intermediaries or shifting transactions offshore. That only increases the difficulty of enforcement and hides the very transfers policymakers want to stop.
There is a practical side, too: enforcement capacity. Taxing cross-border tech deals requires audit power, industrial forensics, and tight alignment across agencies. Those capabilities overlap with what screening regimes already do, and mixing the two invites administrative confusion.
We also need to think about who benefits from a Treasury take and who pays for the risk. A cash grab could flow into general revenue while the security consequences land on the Defense Department and private companies. That misalignment creates incentives for evasion and diminishes accountability for the real cost of the transfers.
Policy should be surgical, not blunt. Narrow prohibitions on certain categories of technologies and robust mechanisms to enforce those prohibitions are better than blanket fiscal penalties. When rules are precise, companies can plan, and regulators can prosecute violations effectively.
Coordination with allies tightens the net around undesirable transfers. Beijing plays a long game, and the U.S. must coordinate export controls and investment screening with partners to close gaps. A unilateral tax policy invites circumvention through third-country deals.
Protecting the tech base means investing in domestic resilience as well: research funding, workforce development, and incentives that keep core capabilities onshore. Those measures reduce strategic vulnerability and create real leverage over adversaries without turning national security into a revenue stream.
Finally, any approach must be transparent and legally solid to withstand court challenges and international scrutiny. Policies drawn up as revenue grabs will face legal attacks and diplomatic fallout. Durable safeguards come from clear law and bipartisan backing, not last-minute fiscal fixes.
The debate is not about whether China poses a threat; it is about how to stop harmful transfers effectively. Lawmakers should focus on tools that prevent the transfer in the first place, preserve U.S. advantage, and avoid creating perverse incentives that make the problem worse.