The global race for technological supremacy in artificial intelligence, quantum computing, and biotechnology is intensifying, with the United States facing growing challenges to its leadership. While American innovation remains strong, strategic competitors—particularly China—are making rapid advances through substantial state-backed investments and coordinated industrial policies. To maintain its edge, the U.S. must address critical vulnerabilities in supply chains, boost targeted public investment, and strengthen enforcement mechanisms for export controls.
China has invested an estimated $900 billion over the past decade in these foundational technologies, far exceeding U.S. government spending in the same areas. This funding has enabled significant progress in AI model performance, quantum communications infrastructure, and biopharmaceutical production. For instance, Chinese researchers now lead in the volume of AI-related patents and publications, and the country operates the world’s only quantum communication satellites and a 10,000-kilometer secure network. In biotech, China produces nearly a quarter of all innovative drugs and dominates the supply of key pharmaceutical ingredients, with 80 percent of U.S. biotech firms relying on at least one Chinese contract manufacturer.
Private investment in the U.S. remains robust in AI, but quantum and biotech sectors face persistent underfunding due to long development timelines and high capital requirements. Early-stage financing for American biotech startups dropped by 65 percent in the first half of 2025, while China spends twice as much as the U.S. on quantum research. Additionally, the U.S. depends heavily on foreign sources for essential materials: 70 percent of rare earths and nearly all heavy rare earths come from China, along with critical chemicals used in semiconductor manufacturing and components for data centers.
To counter these risks, the report recommends several strategic actions. The U.S. should onshore production of vital semiconductor inputs such as ultra-pure chemicals and printed circuit boards, using incentives to attract $20 billion in private investment. A national network of advanced biomanufacturing hubs should be established, supported by stockpiles of key drug ingredients sourced from trusted partners. The Department of Defense could accelerate quantum computing development through procurement contracts, stimulating domestic innovation. An Economic Security Center within the Department of Commerce would improve coordination between government and industry, enhancing technical expertise and control enforcement.
Workforce development is another priority. With an estimated global shortfall of 400,000 semiconductor engineers by 2030, expanding training programs and supporting skilled trades will be essential. Reauthorizing the National Quantum Initiative with increased funding and stronger international collaboration would also bolster long-term competitiveness.
The stakes are high: combined, AI, quantum, and biotech could generate $29 trillion in annual value by 2040. First movers who scale quickly are more likely to shape global standards and gain military advantages. Without decisive action, the U.S. risks falling behind in technologies that will define economic and national security for decades.
— news from Council on Foreign Relations
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U.S. Economic Security
Winning the Race for Tomorrow’s Technologies n nNovember 13, 2025 n nOverview n nStrategic competition over the world’s next generation of foundational technologies is underway, and U.S. advantages in artificial intelligence, quantum, and biotechnology are increasingly contested. The United States must address vulnerabilities and mobilize the investment needed to prevail. n nWhat Are Task Force Reports? n nA hallmark of the Council, Task Force reports provide policymakers a set of concrete judgments and recommendations, forged through bipartisan consensus, on issues of current and critical importance to U.S. foreign policy. n nWho Produces Them? n nTask Forces are led by distinguished cochairs and are composed of some two dozen experts with diverse experience across government, industry, and academia. n nExecutive Summary n nStrategic competition over the world’s next generation of foundational technologies is underway, and U.S. advantages in artificial intelligence (AI), quantum, and biotech are increasingly contested. Economic security tools can help the United States win this competition and address several pressing risks, especially overconcentration of critical supply chains in countries of concern and underinvestment in strategically important areas. This report provides a comprehensive view of the vulnerabilities that the United States should address and offers practical recommendations for strengthening trust in supply chains and mobilizing the investment needed to prevail in these three crucial sectors of the future. n nChallenges to U.S. technological leadership include the following: n nChina: The Chinese government is spending heavily on AI, quantum, and biotech ($900 billion over past decade); making rapid advances in AI model performance, quantum communications, and biotech innovation; working to indigenize tech and dominate key sectors; and willing to weaponize chokepoints. n nInvestment: Private capital avoids quantum and biotech due to long time horizons, lack of commercial demand, and scaling challenges; early financing for U.S. biotech start-ups dropped 65 percent in the first half of 2025; and China is spending twice as much as the United States on quantum. n nSupply Chains: The United States is dependent on China for rare earths (70 percent overall, 99 percent for heavy rare earths), data center and chip components (30 percent of printed circuit boards [PCBs], 60 percent of chemicals), biotech inputs and drug development (80 percent of key starting materials [KSMs], 33 percent of global active pharmaceutical ingredient [API] capacity, 80 percent of U.S. biotech companies have at least one Chinese contract), and single suppliers for quantum equipment (laser diodes, mirrors, amplifiers). n nControls: Effective enforcement and monitoring of U.S. controls on foundational technologies requires tailored and efficient government capacity, technical expertise, and close partnership with the private sector. n nThe following recommendations would advance American leadership in tomorrow’s technologies and reduce the leverage that other countries, especially China, could exploit during a conflict if tensions were to escalate: n nBuild on the Trump administration’s AI Action Plan by onshoring the manufacturing of critical inputs and components for semiconductors, including chemicals, printed circuit boards, and integrated circuit (IC) substrates. n nAccelerate development of the world’s first utility-scale quantum computer through Department of Defense procurement, stimulating the U.S. private sector to meet the department’s need. n nEstablish a national network of advanced biomanufacturing hubs with private-sector co-investment and fund U.S. companies to build six-month stockpiles of KSMs and APIs from trusted markets. n nSecure critical minerals by expanding the National Defense Stockpile (NDS), accelerating permitting, and working with partners and allies to map sources and to pioneer recovery and substitution technologies. n nBuild on the Trump administration’s America’s Talent Strategy, including by supporting the machinists, electricians, and other trades workers who are essential for leading in key technologies. n nEstablish an Economic Security Center at the Department of Commerce that strengthens government coordination, technical expertise, and partnership with the private sector. n nThese targeted government actions, and others detailed in the report, are intended to unleash the U.S. innovation ecosystem, allowing the private sector to scale and diffuse technology globally and responsibly. Given the rapid pace of technological change, the institutional improvements recommended above would also position the United States to better respond to future changes and technologies that have yet to emerge. Looking beyond today’s immediate challenges, the Task Force report concludes by offering principles to help U.S. policymakers decide whether and how to intervene in markets in the name of national security. n nIntroduction n nThe Rise of Economic Security n nEconomic power has long been an important foundation for national security and an enabler of U.S. military and diplomatic power.1 In recent years, however, a series of global shocks have pushed economic power further to the front lines of national security policy. The COVID-19 pandemic disrupted global supply chains and exposed the downsides of concentrated economic interdependence. Russia’s invasion of Ukraine shook global energy and food markets and exposed Europe’s dangerous dependency on Russian energy supplies. China’s actions—especially its massive subsidies aimed at dominating the commanding heights of technology and attempts to dominate critical supply chains—directly threaten U.S. economic growth and technological leadership, as well as the interests of U.S. partners and allies.2 n nFalling behind—especially to China—would allow others to gain those advantages and shape the international system to reflect their own interests. n nWinning in these three areas of technology would contribute substantially to U.S. economic and national security, allowing the United States to take first and full advantage of the commercial, military, and other related benefits, such as shaping global rules and standards. Falling behind—especially to China—would allow others to gain those advantages and shape the international system to reflect their own interests.6 Technological leadership can also help ensure that democracies remain resilient and free, safeguarding them from dangerous dependencies that authoritarian regimes could weaponize. n nEach of these foundational technologies has vast dual-use potential (see figure below). AI can expand access to information, accelerate scientific breakthroughs, and boost productivity, but it can also sharpen weapons for surveillance, misinformation, cyberattacks, and autonomous warfare. Quantum technology could both secure and jeopardize cryptography that protects data, cryptocurrency, and communications. Biotechnology could cure diseases and simultaneously create deadly viruses. n n$29 Trillion: estimated combined annual value of AI, quantum, and biotech by 2040 n nThe next decade will prove decisive, and speed is critical because fundamental breakthroughs could effectively end one era and begin the next. Cybersecurity researchers, for example, warn of “Q-Day,” the moment when someone builds a quantum computer that can crack the most widely used forms of encryption. Being even months behind an adversary with this advantage could result in significant damage as financial and communication systems are compromised along with intelligence and military movements. Other game-changing capabilities have already arrived, such as AI models that can drive cyberattacks and overwhelm current defenses. First movers in technology do not always become dominant, but history suggests they are more likely to establish enduring advantages if they are also fast scalers. n nInnovation and geopolitical competition are redefining the relationship between the government and private sector. In stark contrast to the Cold War, many of the most critical new technologies are now being developed in the private sector with private financing and not by government-sponsored programs and projects. That alters the historical model of managing the dual use of new technologies, as the U.S. government is much more likely to be an adopter rather than an inventor of breakthrough technologies. In other respects, the U.S. government is becoming more active and intervening in the market in new ways, such as taking equity stakes in private companies and sharing revenue from the export of strategically important goods. n nThere are certain risks to U.S. technological leadership that only the government can address, especially given that U.S. competitors are using nonmarket practices to their advantage. Competitors will not easily cede their control of critical minerals, ingredients for drugs, and other chokepoints—central nodes in the global economy where a dominant actor controls access and few substitutes exist.8 Investment shortfalls also call for targeted government action, particularly for biotech and quantum technologies, which struggle to attract sufficient support from the private sector, given long time horizons, high technical risks, and significant capital requirements for development (see figure below). Likewise, as the Trump administration’s America’s Talent Strategy recognizes, the government has an indispensable role to play in cultivating the human capital to compete in these areas by supporting education and training. n nSmart government policy can contribute to the United States establishing a definitive lead in three technologies that will be essential to the future. Recognizing that the U.S. innovation ecosystem is multifaceted, this report aims to make a practical contribution by focusing on how economic security tools can address shortfalls in investment, de-risk supply chains, and design and enforce effective controls that could otherwise jeopardize or undermine U.S. technology leadership. n nChina’s Visible Hand n nThe greatest challenge to U.S. technological leadership comes from the Chinese government, which provides much greater support to strategic industries and has a higher tolerance for accepting failures alongside its successful bets. Over the past ten years, the Chinese government has spent an estimated $900 billion on AI, quantum, and biotech—more than three times U.S. government support for those technologies during the same period.9 At home, Beijing favors Chinese firms and squeezes out U.S. and other foreign competition. China is not merely trying to tilt the playing field in its favor. It is playing a different game altogether.10 n nChinese leader Xi Jinping’s signature initiatives are designed to seize the commanding heights of technology and dominate foreign markets. Officials in Beijing are considering drafting a successor to their Made in China 2025 initiative, a plan launched in 2015 that aimed to dominate strategic sectors in a decade. Assessing the plan’s performance, researchers at Bloomberg identified thirteen technology areas and concluded that Beijing has largely succeeded in five of them—including unmanned aerial vehicles, liquid natural gas carriers, and batteries—and has made significant progress in nearly all the others.11 Chinese tech firms are active in over 165 markets globally and, over the past decade, have benefited from China’s Digital Silk Road initiative.12 n n138 Billion: investment pledged by Chinese government for its national venture fund investing in AI, quantum, and biotech over the next 20 years n nXi understands the stakes, as he told an audience of China’s top scientists and engineers last year: n nCutting-edge technologies such as artificial intelligence, quantum technology, and biotechnology have emerged. . . . At the same time, the world is experiencing accelerated changes unseen in a century, with the technological revolution intertwined with great power competition. Increasingly, high-tech fields have become the forefront and main battleground of international competition. . . . There is an urgent need to further enhance the sense of urgency, intensify efforts in scientific and technological innovation, and seize the strategic heights of technological competition.13 n nChina’s playbook is producing results in these three industries of the future.14 Chinese researchers lead globally in the quantity of AI publications and patents, and in 2024 alone, Chinese AI models reduced the gap with U.S. models in four key performance benchmarks by an average of 80 percent.15 China has surpassed the United States in deploying quantum communications systems—it has launched the world’s only quantum communication satellites and has established a national quantum communication network spanning over ten thousand kilometers.16 China dominates the production of drug inputs—including those needed for antibiotics, fever reducers, and blood pressure medications—and accounts for nearly a quarter of all innovative drug development. In March, the Chinese government announced a new national venture fund that aims to invest an additional $138 billion over two decades into AI, quantum, and biotechnology.17 n nIf China dominates these foundational technologies, the future will look very different. With $29 trillion at stake through 2040, Chinese companies stand to capture a windfall that would be measured in terms of economic growth, jobs, and additional support for R&D, which could ultimately cement China’s advantages in technology for decades beyond. U.S. businesses, meanwhile, could find themselves caught in a vicious cycle, as they struggle to compete in foreign markets with less advanced products and services and struggle to innovate at home with less revenue to invest in R&D. n nChinese leaders have already previewed the perils of this scenario by demonstrating a willingness to weaponize China’s near monopoly on critical minerals extraction and refining. They first cut off access to rare earths in 2010 in an attempt to coerce Japan, which was suddenly unable to obtain minerals essential for electronics and defense systems, among other technologies. Earlier this year, Chinese controls on rare-earth exports temporarily halted foreign manufacturing lines and threatened U.S. companies and workers in the automotive, technology, and defense sectors, before China lifted the restrictions as part of trade negotiations. If China controls the supply chains underpinning tomorrow’s foundational technologies, from raw materials to advanced manufacturing, it will gain even more chokepoints that could be weaponized.18 n nIn this scenario, the world would be more perilous for individuals and any government unwilling to bend to Beijing and safer for many authoritarian regimes. State censorship and mass surveillance could spread with Chinese products and standards. The proliferation of Chinese AI into more of the world’s devices, essential services, and critical infrastructure would increase the risks of mass espionage and sabotage, with potential damage magnitudes worse than recent cyber operations like the Salt Typhoon hacks.19 n nDecisive military advantages hang in the balance. If the People’s Liberation Army (PLA) gains superior AI, its forces could anticipate enemy movements, optimize logistics, and dominate the battlefield by deploying drones and other autonomous systems with unmatched speed and efficiency. Quantum superiority could enable the PLA to decode U.S. and allied communications and intelligence, while making its own communications impenetrable. The PLA could harness biotechnology to field lethal weapons that target individuals or populations based on genetic characteristics. n nWith these stakes in mind, the next section considers how to use economic security tools to advance U.S. leadership in AI, quantum, and biotech (see figure below). The report concludes by recommending ways to upgrade U.S. economic security tools and offering principles to guide their use. n nWinning the Race n nThis section considers how to use economic security tools to advance U.S. leadership in , quantum, and biotech over the next five years. For each foundational technology, it summarizes the current state of play, identifies key challenges related to investment, supply chains, and controls, and recommends targeted government interventions. To be sure, leading in these areas will require using an even broader array of supporting government policies and progress in dimensions beyond the scope of this study. But economic security tools have a major role to play (see figure below). n nArtificial Intelligence n nAs the Trump administration’s AI Action Plan observes, “The AI race is America’s to win.”20 Winning in AI over the next five years means leading across the AI tech stack, capturing a dominant share of the global market for AI, and slowing the diffusion of advanced capabilities to adversaries (see figure below). Thanks to strong private investment, the United States leads globally in AI innovation and the buildout of AI data centers. But China is closing the performance gap, is taking a greater share of key data center components, and has a near monopoly on rare earths extraction and refining. To stay ahead, the U.S. government will need to make targeted investments that build manufacturing capacity and adopt security measures that strengthen export control enforcement and protect AI data centers. n nInvestment: U.S. Private Sector Driving AI Innovation n nWhile the United States still develops the most advanced AI models, its lead is shrinking as others, mainly China, make headway. Last year, U.S.-based institutions produced forty notable AI models, according to the Stanford AI Index, as compared to China’s fifteen. China’s models are advancing, however, with major benchmarks approaching parity in performance, and the country has greater access to data and human capital that could provide an edge in the years ahead.21 As commercial adoption grows globally, the private sector is increasingly driving AI innovation, producing 90 percent of notable AI models in 2024, up from 60 percent the year prior.22 n nRetaining the lead in AI also hinges on clearing several obstacles to domestic adoption. The United States leads the world in AI users, but China is gaining ground.29 Small businesses and the federal government, for example, have yet to fully adopt AI at the scale of larger firms.30 Barriers to adoption include cost, lack of training, and questions about return on investment. The federal government faces the challenge of integrating AI with legacy information technology (IT) systems, concerns about data privacy and security, and procurement processes. The Trump administration’s AI Action Plan aims to improve national adoption, including by deploying advanced AI capabilities, use cases, and AI talent across federal agencies and improving interagency coordination on AI procurement by the federal government. For the private sector, it seeks to establish regulatory sandboxes and convene stakeholders in specific sectors, such as health care, energy, and agriculture.31 n n400,000: estimated global shortfall of semiconductor engineers by 2030 n nChina is rapidly deploying AI with initiatives reaching into every corner of society. China’s Ministry of Education has issued guidelines requiring AI to be woven into the national curriculum from elementary school through university. Beijing, Shenzhen, and other cities have launched “AI+” action plans through which the government promotes AI adoption, builds computing centers, and integrates AI into government services. Chinese state-owned banks have developed lending programs specifically for AI-related industries. Government directives have also accelerated the integration of AI with public services and industrial applications, with guidelines aiming for a 90 percent AI adoption rate across the entire Chinese economy by 2030.32 The Chinese government’s strong support and focus on practical applications, rather than artificial general intelligence, could provide an edge in producing low-cost solutions to sell globally. n nSupply Chain: Dependencies in Semiconductors, Data Centers, and Critical Minerals n nWith substantial capital supporting AI development and deployment in the United States, the primary near-term risks to U.S. leadership stem from supply chains. The U.S. semiconductor industry is expected to produce 23 percent of the world’s leading-edge chips by 2030, up from 15 percent in 2024, following $450 billion in private investment sparked by recent manufacturing incentives.33 But as Table I illustrates (see Appendix), the United States still faces several chokepoints for AI in semiconductors, data center components, and critical minerals.34 To be sure, components sourced from allies and partners present a lower level of geopolitical risk than those sourced from adversaries. However, this analysis also identifies components that are highly concentrated in small numbers of friendly countries. As the COVID pandemic demonstrated, supply chains risks are not limited to foes. n nSeveral semiconductor supply chain risks stand out. Chip fabrication requires wet chemicals and dry etchants that are essential for cleaning and etching patterns on silicon wafers. China is a key source of those inputs, while Japan produces silicon wafers and photoresists that transfer circuit patterns onto wafers. Physical dependencies include integrated circuit (IC) substrates, used to connect chips to , from Taiwan, South Korea, and Japan and advanced manufacturing equipment sourced from the Netherlands and Japan. Taiwan plays an outsized role by hosting much of the world’s leading-edge research and design capabilities; advanced packaging capacity, which stacks and integrates chips after fabrication; and upstream inputs for packaging and insulation, such as polyethylene and polypropylene resins. n nChinese government subsidies have undercut the ability of the United States and partner countries to compete in the market for legacy and power semiconductors. Legacy chips are less advanced but remain important, given their use in cars, consumer electronics, and defense products. Power chips are used for managing high voltages and currents. Thus far, U.S. policymakers have responded with tariff investigations into semiconductors, manufacturing equipment, and legacy nodes. Congress has also considered a range of restrictions to prevent U.S. government agencies from procuring semiconductor products and services from China.35 But these measures still leave a range of risks related to other parts of the AI supply chain, particularly for data centers (see figure below). n nThe United States relies on China for 70 percent of its rare earths and nearly 100 percent of its heavy rare earths… n nChina’s near monopoly on critical minerals extraction and refining is another significant risk, given the importance of those inputs for semiconductor manufacturing and data center components. The United States relies on China for 70 percent of its rare earths and nearly 100 percent of its heavy rare earths, which together are used for polishing semiconductor wafers and as insulation for advanced chips, among other applications.38 The United States is completely dependent on China for all of its arsenic and holmium copper, which are critical for producing silicon chips and quantum cryocoolers, respectively. Though other countries, including the United States, boast significant critical mineral reserves, they do not have scaled infrastructure to refine mineral concentrates into usable compounds. China’s vast refining and processing capacity, therefore, poses an additional challenge to de-risking efforts, as minerals mined elsewhere often pass through China. n nControls: Reach Exceeds Grasp n nThe United States has struggled to enforce export controls on advanced semiconductors. Since 2022, the primary goal of these controls has been to maintain as large a lead as possible over competitors. In practice, however, advanced semiconductors have continued flowing to prohibited countries, underscoring the basic challenge of controlling goods in a global economy and the importance of persuading other nations to adopt and enforce the same controls.39 China remains one to two generations behind in semiconductor production but has made progress in deep ultraviolet lithography and advanced packaging technologies. As these trends highlight, controls can at best slow an adversary, but only temporarily. That is why they must form part of a longer-term strategy that keeps U.S. technology ahead in performance and adoption. n nRecent experience also highlights challenges in the U.S. government’s export control regime. The Commerce Department’s Bureau of Industry and Security (BIS) struggles to attract technical expertise on par with industry to design controls and relies on antiquated data systems to monitor them. BIS’s staff capacity has not kept pace with the growth in controls. In 2021, there were more than 32 million U.S. exports of dual-use items, and BIS had only 190 enforcement agents and analysts, including only three agents in China and Hong Kong.40 Finally, the penalties for violating export controls have remained relatively mild, and, because they rarely approach the value of the illegal transactions, they do not sufficiently deter violators. The largest export control fine to date, $300 million, was more than twice the estimated profit of the illicit transaction but significantly less than its revenue.41 n nRecommendations n nThe Trump administration’s AI Action Plan includes recommendations to accelerate innovation, build infrastructure, and lead internationally.42 Building on those actions, the following recommendations focus on addressing supply chain vulnerabilities and strengthening controls. Recommendations for developing the U.S. workforce and improving access to critical minerals are included near the end of the “Winning the Race” section, given their broader relevance. To that end, the U.S. government should consider the following actions: n nSupport American manufacturing and trusted sourcing from partners and allies by offering incentives to shift supply chains away from unfriendly countries. Without targeted incentives, supply chains will remain overly concentrated. Analysis of recent investments by McKinsey & Company suggests that leveraging $4.5 billion in public incentives and foreign investment could catalyze an additional $20 billion in private investment and directly support up to 37,000 jobs in the priority areas below. Building and operating these manufacturing facilities will also depend on ensuring adequate access to supporting infrastructure, such as water and water treatment, grid connectivity and power generation, and transport and logistics—requirements that present opportunities for additional growth and jobs. n nChemicals: The U.S. government should incentivize companies to onshore the production of chemicals for semiconductors by 2030, including ultrapure wet chemicals, dry etchants, and photoresists. Japan is a natural partner for this effort, given that the U.S.-Japan trade and investment agreement includes $550 billion of Japanese investment into the United States, including for the semiconductor industry, and Japanese firms are leaders in relevant areas, such as photoresists. Approximately $3 billion would bridge the gap in startup costs between foreign facilities and those in the United States by covering up to 25 percent of the initial investment for up to 50 U.S. facilities, which would support 15,600 jobs. Those incentives would attract up to $17 billion in additional private capital by capping funding at $300 million for the most expensive facilities. (See Appendix for more details on chemical dependencies.) n nPrinted circuit boards: The U.S. government should pursue a dual-track strategy to expand and manufacturing capacity. Domestically, $900 million in grants could subsidize up to 35 percent of capital costs for 5 to 7 new dense AI server PCBA facilities, mobilizing $1.6 billion in private investment, supporting up to 8,200 jobs, and shifting 5 to 10 percent of global server PCBA production to the United States. Abroad, the U.S. International Development Finance Corporation (DFC) should provide some $2.5 billion in debt financing to support PCB manufacturing expansion by U.S. businesses in key markets, such as India and Malaysia, complementing Thailand’s own successful incentives and recent progress. n nsubstrates: Congress should extend the Advanced Manufacturing Investment Credit beyond its 2026 sunset and expand it to support critical semiconductor inputs, particularly IC substrates, which serve as the base materials connecting chips to printed circuit boards. This incentive initially offered a 25 percent tax credit for a facility producing semiconductors or semiconductor manufacturing equipment. A targeted expansion of the investment credit would cost $750 million and could unlock over $2 billion in foreign direct investment from major IC substrate companies and support up to fourteen thousand jobs. n nStrengthen controls and enforcement. Priorities for action include the following efforts: n nUpgrade expertise, technology, and authorities at the Department of Commerce’s Bureau of Industry and Security by providing flexible hiring authorities for technical experts; adopting modern analytics and data capabilitiesto better design export controls, identify evasion, and evaluate effectiveness; and codifying authorities for the Office of Information and Communications Technology and Services (ICTS) while protecting free speech. Those actions would benefit AI export control enforcement most immediately, as well as position the U.S. government to better manage nascent controls in quantum, biotech, and other emerging technologies. n nIncrease penalties on export control violations closer to the value of the illicit transaction and extend penalties to financial facilitators. Experience with sanctions shows that significant penalties incentivize compliance and deter violations, especially when extended to include the banking system, which is concentrated and has robust compliance programs. The Department of Commerce should utilize its authority to levy administration penalties that are up to twice the revenue of the illicit transaction. The Department of Justice and the Department of the Treasury should increase banks’ liability for knowingly facilitating export control violations. Effective controls will need to affect the incentives of financial facilitators, not just the exporters and re-exporters. n nCreate a fast technology teardown program among relevant U.S. government agencies, including the Department of Commerce, Department of Defense (DOD), and National Security Agency, to rapidly acquire and analyze hardware and software from foreign sources. That would allow the U.S. government to more quickly assess how foreign technology is progressing, including its capabilities, origins of components and source code, and effectiveness of any related U.S. and allied controls. This program would leverage special acquisition authorities at the Defense Department and the intelligence community, as well as their expertise and that of specialists at the Commerce Department. n nConclude an ICTS investigation of AI data center supply chains to better assess risks and potential responses, including prohibitions on some foreign components, such as transceivers. BIS’s ICTS office, which is leading this investigation, would also benefit from having Congress codify its authorities to investigate, mitigate, and prohibit ICTS transactions involving foreign adversaries. Codification would help ensure consistent application of these authorities and guard against legal challenges. n nQuantum Technologies n nQuantum technologies—including computing, communications, and sensing—are more nascent than AI. Quantum computing uses quantum bits, or qubits, to enable faster processing of complex calculations. Quantum communications use the principles of quantum mechanics to drastically improve the security of communications. Quantum sensing uses similar principles to allow for extremely precise measurements at the atomic level. n nWinning in quantum over the next five years means leading in and being the first to reach utility-scale quantum computing. Of particular importance are “gates-based” approaches, which are the most general purpose and theoretically powerful, as they can, in principle, run any quantum algorithm. The United States currently leads in quantum computing and sensing technologies, but China leads in certain aspects of quantum communications and is investing heavily in general quantum research and development. Given that there are several competing approaches to delivering the underlying technology, any one of which could prove viable, the U.S. government should focus on providing targeted support to reduce the cost of pilot facilities for testing equipment and on securing supply chains for the most cost-effective, scalable approaches. Since quantum efforts are already international in nature, the United States will need to adjust export controls to cover new approaches and equipment with allies and partners. n n[Quantum] computing represents the biggest economic opportunity of the three quantum technologies and could create $1 trillion to $2 trillion in economic value by 2035. n nInvestment: Public Investment Needed to Accelerate Utility-Scale Computing n nComputing represents the biggest economic opportunity of the three quantum technologies and could create $1 trillion to $2 trillion in economic value by 2035.43 “Utility-scale” quantum computers that solve real-world problems that are impractical on classical computers are anticipated to arrive around 2030, although more conservative projections put the moment around 2035 to 2040. Regardless of when the breakthrough arrives, achieving it will require major investments in hardware. Estimates vary but often land in the neighborhood of several billion dollars to scale production of specialized components for quantum computers. n nThe path to scaling quantum computing is especially challenging for companies that lack revenue from other business lines, as well as larger public companies accountable to shareholders, due to high R&D expenses over long periods of time and capital costs for pilot facilities. The direct market for quantum computing is estimated to reach $28 billion to $72 billion by 2035, a wide range that reflects a high degree of uncertainty and risk for private investment.44 A long time horizon, a lack of commercial demand, and technical uncertainties make it challenging for quantum-related start-ups and large public companies to secure capital, especially those developing hardware. n n$15.3 billion of Chinese public funding went towards quantum as of 2023 n nChina leads the world in quantum communications and is making significant strides in quantum sensing and computing. It has constructed the world’s largest quantum communications network, which spans over 10,000 km and integrates quantum key distribution, a technology that increases security of communications and allows detection of eavesdropping.48 China has also launched two quantum satellites, enabling deployment of quantum communications to other countries, such as South Africa, in March 2025.49 While China’s sensing capabilities are limited to the laboratory scale, it is making progress and has advantages to leverage in research output and deployment.50 In 2021, China built a fully domestic superconducting quantum computer that reportedly surpassed some U.S. systems at the time in speed and processing power but has since fallen behind in key performance measures, such as qubit count and error correction.51 n nWorkforce development is an important challenge for the United States in this field, as demand for quantum talent is rapidly outpacing supply, with limited academic pathways, a small pool of trained specialists, and a growing gap between research and commercial skills. Despite being a global leader in quantum technologies, the United States is fourth in quantum talent availability behind the European Union, China, and India. In a poll by the Quantum Economic Development Consortium, a leading global industry group, 92 percent of its members agreed that there is a shortage of U.S. citizens and permanent residents with quantum qualifications.52 With quantum computing projected to generate 250,000 jobs globally by 2030 and 840,000 by 2035, the United States risks watching those opportunities go elsewhere.53 n nReauthorize the National Quantum Initiative with an emphasis on deepening international partnerships for research and supply chain security. Since 2018, the NQI has established five Quantum Information Science (QIS) Research Centers (at the Department of Energy) and five Quantum Leap Challenge Institutes (at the National Science Foundation) and supported research into promising quantum approaches, materials, and programming models, among other areas.55 It also paved the way for the United States to establish eleven bilateral partnerships for QIS research and supply chain security, including with Australia, Germany, Japan, and South Korea. The proposed NQI Reauthorization Act, which would expand the program’s national infrastructure, extend its duration to December 2034, and authorize $2.7 billion over five years, was not brought for a vote in 2023 or 2024, though it was the subject of a hearing this year. Congress should renew these core provisions and build on the International Quantum Cooperation Strategy, previously proposed by the National Science and Technology Council’s Subcommittee on Quantum Information Science in 2024, by deepening cooperation with allies and jointly assessing research and supply chain barriers.56 n nIncrease restrictions on U.S. research institutions acquiring quantum equipment from foreign countries of concern.57 The U.S. government should modify the implementation of the UN Educational, Scientific and Cultural Organization (UNESCO) Florence Agreement, a 1950 treaty that waives customs duties on scientific materials, to give preference to U.S.-manufactured research equipment for quantum and waive import duties for items purchased from allies and partner countries, such as quantum-enabling lasers, optics, and photonics components. In cases where there are sufficient alternative and affordable sources of supply, the United States should not grant these preferences to items from foreign countries of concern. Sourcing requirements for research institutions could be added to federal funding, including through reauthorization of the NQI, but should also take into account the availability of substitute equipment and strive to offer resources to offset cost increases. Additionally, the Commerce Department could pursue an ICTS investigation of security risks related to quantum components. n nBiotechnology n nBiotechnology has the potential to transform the physical world in the coming years by harnessing cellular and biomolecular processes. At stake is control of tomorrow’s production methods for everything from lifesaving medicines to high-efficiency crops and livestock to chemicals and critical minerals. In the future, the military could harness synthetic organisms to protect soldiers, repair equipment, generate fuel, and produce water