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They'll just not apply it to them either in statue or simply obviously not have their sanctions enforcement people take action, there are two options there. I guess they could also give them exemptions which they'd create a legal means for but that seems more hassle than just not enforcing it (who's going to complain? what president or lawmakers will try to force their hand?) or creating a carve-out.

Fact is US has been ignoring one-China principle for forever. They recognize it in order to have relations but then sell weapons and their top officials are always talking about helping Taiwan "defend democracy" and so on.

If the ban carves out an exception for Taiwan wouldn’t that escalate the tensions

No. The US has done far more provocative things and China always warns about red lines then does nothing or at most snubs the US a little. If China is ever going to escalate and hit the US hard with a retaliatory move that's more than a token gesture they'll do so for far more reason than that like the sanctions themselves existing or something. A carve-out for Taiwan won't matter one bit in the overarching calculus of relations with the US as has been shown time and again by China. The only thing that might make China actually react is either the US moving to station a large number of troops there or build a major base or moving nukes there or the DPP types declaring independence or the US openly urging them to do so. Those are the only things that would really change the calculus of the status quo that China and the US has where China tolerates US provocations and separatism and weapons sales.