U.S. President Donald Trump's growing prioritization of trade issues over technology matters could enable China to close the gap with the United States on developing AI systems, and will embolden Beijing to seek relaxed export controls that would help it on the AI hardware side of the industry, not just software and services. The United States' two leading graphics processing unit (GPU) designers, AMD and Nvidia, have agreed to pay the government 15% of their revenue made from sales in China of certain advanced AI-focused chips as part of a deal for the U.S. Commerce Department to approve export licenses for sales of such chips, including Nvidia's H20 and AMD's MI308 AI accelerator chips. The approval of exports of the H20 accelerator was unsurprising as Nvidia announced on July 14 that the Trump administration had agreed to approve shipments of the H20 and MI308 chips, which it blocked in April, and that it was filing paperwork to receive the authorization. However, the attached payments for 15% of revenue to be handed over to the U.S. government are unprecedented. Trump also hinted on Aug. 11 that his administration would approve a scaled-back version of Nvidia's Blackwell-architecture GPUs — a family of next-gen AI chips that are more advanced than the H20's Hopper-architecture — to sell to China. Separately, the Chinese government is reportedly also pressing the United States to ease export controls on high-bandwidth memory (HBM) chips as part of trade talks. 

• The leaks about the quid pro quo deals between the United States and its two leading GPU designers came just hours before the U.S.-China truce on tariffs was set to expire on Aug. 12. Trump extended the truce on Aug. 11 via an executive order, which likely included the approval of the chip exports, as U.S.-China trade talks in May and June yielded an agreement where both sides agreed to remove any restrictions imposed on each other from April 2 onward. 
• While the export of more AI accelerators will help Chinese AI companies, in recent days, Chinese authorities have been warning about national security-related concerns regarding Nvidia's H20 chips. Government regulators sent letters to leading companies asking why they were using "less advanced" chips like the H20 instead of domestic counterparts and ordered them not to use the Nvidia chips for national security- and government-related work. In 2024, Chinese companies reportedly bought around 1 million H20 chips, which is more than double the amount of Huawei Ascend 910B chips (a locally produced competitor chip) that they bought during the same period. 
• Nvidia originally designed the H20 chip specifically for the Chinese market after U.S. export restrictions on advanced AI chips took effect in late 2023. The H20 chip was designed not to exceed the technical thresholds set in those regulations. Nvidia is believed to have some 1.3 million H20 chips in its inventory — worth about $16 billion — that it has not been able to sell. 
• Although not as advanced as Blackwell-architecture chips, the H20 and the MI308, along with Huawei's Ascend chips, are the most advanced AI accelerators in the Chinese market. These chips are crucial in the development and deployment of AI systems. While Huawei's chips are comparable, Chinese chipmakers building Huawei's chips have struggled to produce them en masse to completely replace Nvidia and AMD chips. Moreover, Huawei's chips rely on a different software toolkit than Nvidia's more established CUDA toolkit, meaning companies previously using Nvidia chips would need to rewrite code to use Huawei's. 

In recent months, Trump has increasingly prioritized mending trade issues with China over technological protectionism, which will likely lead to a near halt in significant U.S. technology export restrictions on China for the remainder of the year, if not longer. Trump is currently trying to show that his trade and tariff strategy, which is widely unpopular with many Americans, is producing successful trade deals that he claims are beneficial for the country. The China-U.S. trade truce, which is currently scheduled to last until Nov. 12, is one such arrangement. Additionally, Trump is trying to avoid re-triggering a rare earth magnet supply disruption caused by Chinese export restrictions that caused significant supply chain disruptions for automotive manufacturers from April to June. Even before the United States announced that it would authorize exports of Nvidia's H20 accelerators in mid-July, the White House had already rolled back a series of other recently implemented restrictions, including on the export of advanced electronics design automation software, which is critical for the design of advanced AI chips. While the Trump administration's deals with Nvidia and AMD may not survive court challenges, the White House will likely remain restrained in implementing new export restrictions on China as long as trade negotiations continue to lead to extensions of their tariff truce or a trade deal. However, inbound restrictions, like blocking Chinese investments in the United States, will likely continue. If trade talks eventually fall apart, the Trump administration would be more likely to reverse course, implementing more export restrictions to ratchet up pressure on China, likely with trade concessions as a goal. 

• The Financial Times reported in late July that the Commerce Department’s Bureau of Industry and Security, which oversees U.S. export licenses and controls, had been told in "recent months" to avoid imposing tough export restrictions on China. The instruction came as the Trump administration focused on securing a meeting between Trump and Chinese President Xi Jinping later in 2025. 
• Critics of Trump's strategy warn that allowing companies to pay for export licenses sets a dangerous precedent that could lead companies in other sectors to approach the White House for similar deals, further weakening U.S. export controls on key technologies to China. They also warn that Trump's strategy is politicizing U.S. export control policy at the expense of legitimate national security concerns. 
• Proponents of Trump's strategy argue that third-party countries like Malaysia are already reexporting many restricted chips to China, so allowing Nvidia to do so directly does not represent a national security risk. 
• The United States' freeze on export controls is reminiscent of Trump's first term, when, prior to the signing of the phase one trade deal between the United States and China, the Commerce Department delayed expanding restrictions on Huawei in an effort not to disrupt trade talks.  

Trump's willingness to ease export controls will embolden China to seek further reductions — particularly affecting AI hardware — and to appeal to Trump's transactional style by offering a combination of threats and concessions. The AMD and Nvidia arrangements reflect a pattern in the second Trump administration of companies and countries striking ad hoc quid pro quo deals with Washington. China has already leveraged this dynamic, linking its rare earth export controls to recent U.S. restrictions introduced in April and May, including those on Nvidia's H20 accelerator, during trade talks in May and June. Beijing's insistence on including HBM chips in any trade deal is one example of this strategy. Similarly, China was adamant in June negotiations that the United States remove export controls on electronics design automation software, and will likely press for further relaxations on chipmaking gear. Ultimately, Beijing will likely tie such demands to a possible Trump-Xi meeting or other large-scale purchases of U.S. goods as part of a broader trade arrangement.

Loosening U.S. export controls beyond just Nvidia's H20 and AMD's MI308 chips would significantly accelerate China's development of AI hardware, boosting its ability to compete directly with global chipmakers. In the short term, lifting curbs on the H20 and MI308 will help China build AI systems and data centers. Going forward, the White House may consider relaxing other AI-related export restrictions in trade talks with China. For instance, the United States could reduce export controls on HBM chips, which are essential to high-performance AI systems, sitting alongside the GPU and increasing memory bandwidth. Reduced U.S. export controls on HBM chips would allow Huawei and other Chinese chipmakers to build more advanced full AI chips, strengthening China's ability to compete globally on AI hardware, not just in software and services. Likewise, the easing of U.S. restrictions on electronics design automation software and chipmaking technology would accelerate China's progress in both designing and manufacturing advanced chips. 

• From a technical perspective, Huawei's Ascend 910B and 910C chips outperform the H20 in total processing performance and efficiency. However, they lack the memory bandwidth that the H20 chips have, in large part due to restrictions on China's access to HBM chips.
• While China has warned domestic companies against using Nvidia's H20 accelerator, this stems more from its drive to strengthen domestic chipmakers like Huawei's Ascend line than from any intent to restrict their access to U.S. technology.