Unfortunately, America has something much bigger to lose than the console manufacturers and that's valuable trade secrets ...
I'd consider it to be a victory for the Trump administration if they manage to stick it to China and delay their technological development by 5 more years ...
Why do you think it'd "stick it to China"?
We're talking about a country that is literally building 10's of millions houses just to keep its economy growing. We're talking about a country that is literally building islands in order to be a bigger player in trade.
China is going to go to great lengths to get better, regardless of what road blocks the US puts up.