Trump Approves Nvidia Chip Sales to China for 25% "Tax" Cut
- President Trump approved the export of Nvidia's H200 AI chips to China in exchange for a 25 percent surcharge on sales which reverses previous strict bans.
- The decision grants Beijing access to powerful AI hardware previously deemed a national security risk but keeps the most advanced Blackwell chips restricted to US allies.
- Nvidia CEO Jensen Huang secured the victory after intense lobbying while critics like Senator Elizabeth Warren warn the move empowers China's military and surveillance state.
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| Photo by Mariia Shalabaieva on Unsplash |
President Donald Trump has fundamentally altered the trajectory of the global semiconductor war by granting Nvidia Corp. permission to sell its H200 artificial intelligence chips to China. This decision effectively dismantles the strict export firewall erected by the previous administration. In exchange for access to the world's most advanced AI hardware Beijing must agree to a 25 percent surcharge that will flow directly into the US treasury. Trump announced this pivot on his Truth Social platform and claimed that Chinese President Xi Jinping responded favorably to the arrangement.
The policy shift represents a massive victory for Nvidia CEO Jensen Huang. He has spent months cultivating a close relationship with the new administration and arguing that blanket bans only incentivize China to develop its own domestic champions like Huawei. By allowing the sale of the H200—which is powerful but still a generation behind the cutting edge Blackwell series—Trump is betting that the US can monetize China's demand without surrendering its technological supremacy. The H200 is roughly ten times more powerful than the H20 chips previously allowed for export which signals a significant upgrade for Chinese tech firms.
However this move has ignited a fierce backlash from national security hawks in Washington. Democratic Senator Elizabeth Warren slammed the decision as a "colossal economic and national security failure." Critics argue that providing Beijing with such advanced hardware will accelerate China's military modernization and surveillance capabilities. Chris McGuire of the Council on Foreign Relations warned that this concession undermines the entire strategy of containment at a time when China is aggressively squeezing the US on trade and minerals.
The mechanics of the deal are unprecedented. The 25 percent surcharge acts as a tariff on Nvidia's revenue rather than a traditional tax. This follows a pattern of unorthodox financial arrangements by the Trump administration which previously floated taking a 10 percent equity stake in Intel. The commerce department will vet "approved customers" in China to ensure the chips do not fall directly into the hands of the People's Liberation Army but experts warn that end user verification is notoriously difficult in the opaque Chinese market.
Nvidia shares jumped 2 percent on the news as investors calculated the potential windfall. China represents a $50 billion opportunity for the chipmaker which had previously been forced to exclude the market from its financial forecasts. Other US semiconductor giants like AMD and Intel are also eligible for the program which could open the floodgates for billions in renewed revenue. Trump explicitly framed the policy as a job creation engine for American manufacturing.
Despite the breakthrough significant hurdles remain. Beijing has previously instructed its domestic tech giants to shun Nvidia's watered down chips in favor of local alternatives like those from Huawei and Cambricon. It remains unclear if Chinese companies will embrace the H200 given the geopolitical baggage and the high cost associated with the surcharge. The "positive response" from Xi Jinping reported by Trump has not yet been publicly confirmed by Chinese state media.
The geopolitical timing is critical. This deal buys the US leverage in ongoing negotiations over rare earth minerals where China holds a near monopoly. By relaxing the chokehold on chips Trump may be seeking concessions on other fronts. Alex Capri of the National University of Singapore suggests this is a transactional move designed to prevent supply chain disruptions rather than a strategic reset.
The H200 sits in a sweet spot of capability. It is powerful enough to train large language models but lacks the sheer brute force of the upcoming Blackwell and Rubin architectures which remain banned. This tiering strategy attempts to keep China permanently one step behind while still extracting maximum profit. However researchers at Georgetown's CSET warn that even "second best" chips can be clustered to achieve military grade computing power.
Ultimately this policy marks the end of the "total blockade" era of tech containment. It replaces ideology with transaction. The US government has effectively become a partner in Nvidia's China business by taking a cut of every sale. Whether this gamble strengthens American industry or arms a strategic rival will only become clear as the chips begin to flow across the Pacific.
For now the winner is clearly Jensen Huang. He has navigated a geopolitical minefield to secure access to his most critical growth market. The loser may be the bipartisan consensus on national security which has been overruled by the executive branch's desire for a deal.