Trump backs away from the tech war with China that he started

This week, President Donald Trump announced that he would allow U.S. chipmaker Nvidia to sell its advanced H200 chips to China, describing the move as reversing a failed Biden administration policy that he said “slowed innovation and hurt American workers.”

He continued: “This era is over.”

The first notable thing about the decision is that it represents a clear victory for Nvidia and its allies in government over Washington's China hawks, who have pushed to block China's access to the chips needed to develop the most advanced AI models. (Nvidia's even more innovative B200 chips are still off the table.)

The second notable thing is that if this is the end of an era, it is an era that began during Trump's first term. “The original person who moved the U.S. toward a chip control strategy was Trump,” said Steven Feldstein, a senior fellow at the Carnegie Endowment who studies technology and geopolitics. This era began in earnest with Trump's bans over the supply of components from the US to Chinese tech giants ZTE and Huawei in 2019, citing those companies' ties to the Chinese government and military.

Feldstein says it was those moves that first got Chinese leaders thinking seriously about how to escape their vulnerability to U.S.-controlled chip supply chain shortages. (While China has its own semiconductor manufacturing, the most advanced chips are overwhelmingly designed by U.S. companies—notably Nvidia—and manufactured in Taiwan using equipment made in the Netherlands.)

This was an area of ​​continuity between the first Trump and Biden administrations. Biden tightened restrictions on Huawei and expanded the policy, restricting not only the equipment used by Chinese companies to make chips, but also the export of the most advanced chips themselves. This happened in the context of Russia's war in Ukraine, in which Chinese companies were accused of supplying technology components to Russia in defiance of US sanctions, as well as in the context of the AI ​​boom that began in earnest with the release of ChatGPT in 2022.

In the View from some Biden administration officialsThe US and China were in a new arms race to develop super-intelligent AI, and US control of the chip supply chain gave them a head start in the race. This culminated in extensive domination that resulted in the division of the Divide countries of the world into three levels of access to American chips. America's closest allies could buy the chips, adversaries like China and Russia couldn't, and most of the world found itself in the middle, facing heightened scrutiny.

Since Trump's return, however, there has been a lively debate about the strategy for restricting chip exports. On the one hand, there are China hawks in both parties who largely support these measures; There are bipartisan legislative proposals to codify the Biden restrictions into law. Their argument is that limiting the most advanced AI chips like Nvidia's H200 will preserve the U.S. advantage in AI competition, which is particularly important given China's efforts Developing AI-related military capabilities. AI developers, notably Dario Amodei from Anthropic, were also there expressly supports the restrictions.

The most influential voice on the other side of the debate was the world's most valuable company, Nvidia, whose CEO Jensen Huang argues that the best way for the US to maintain AI supremacy is to maintain AI supremacy The rest of the world relies on American chips. (Chinese companies have also skirted the restrictions Import black market chips or operate from there Data centers in third countries.)

Born in Taiwan, Huang had long been fiercely apolitical, which was easier to enforce at a time when Nvidia was better known for developing the graphics cards that made games like Doom and Quake possible. But his company has become closely tied to the AI ​​boom and all the geopolitical entanglements that come with it, and Huang has been one lately inevitable presence at Trump's sidewho is likely to replace Elon Musk as the technology CEO closest to the White House. It certainly doesn't hurt its cause that the AI ​​boom is keeping the stock market afloat; Nvidia itself accounts for about 8 percent of the S&P 500. The prospect of the US taking a cut of Nvidia's revenue undoubtedly sweetened the deal.

The chipmaker also has allies in government, notably investor, influential podcast host and White House AI czar David Sacks. Who represented the case? that U.S. interests are better served by easing restrictions to help U.S. companies maintain their market share. Commerce Secretary Howard Lutnick has also argued that the US should try to keep China “addicted” to US chips. Between that announcement and Trump's, it's been a great week for this tech-focused faction of Trumpworld Teasing an Executive Order Blocking AI regulation at the state level over the objections of some of his MAGA allies.

Although Huang and Sacks often frame their arguments as wanting to maintain the U.S. advantage over China, it's not even clear that Trump is actually interested in doing so. His statement made it clear that “President Xi responded very positively!” for the announcement.

Exit from “great power competition”?

Already in 2017, the Trump administration announced in its National Security Strategy, the “Great power competition” has returned, a framework that the Biden administration also enthusiastically embraced. The chip restrictions were part of an overall strategy to maintain a technological and military edge over a major power rival. This Trump administration seems less interested in competing with China and more interested in doing deals with China, a reality underscored by a new national security strategy 2025, published last weekwhich prioritized security concerns in the Western Hemisphere and culture war conflicts with Europe over great power competition.

Trump's decision puts Republican China hawks in a difficult position. “The CCP [Chinese Communist Party] will use these sophisticated chips to strengthen its military capabilities and totalitarian surveillance.” said Rep. John Moolenaar, Co-Chair of the Special Committee on Competition with China. And it's another example of the extent to which personal relationships and business interests This administration's foreign policy is often driven more by ideology or traditional national security concerns.

However, it is also possible that Nvidia has won over the wrong government. Despite Trump's announcementChina reportedly plans to restrict domestic access to the H200 chips as part of a strategy to encourage its own companies to make products that compete with the Americans.

Trump may have declared a truce in the chip war, but no one told Beijing.