Trade spat between US and China temporarily deescalates
In a significant shift, the U.S. government has lifted the prior export ban on high-performance AI chips to China, allowing shipments of advanced chips like Nvidia H20 and AMD MI308 to specific Chinese customers. This policy reversal, driven by economic considerations, marks a departure from earlier restrictions imposed just months before.
The move to ease export controls could potentially generate $15 billion in sales for Nvidia and AMD in 2025, with Nvidia earning around 13% of its revenue from the Chinese market. Industry lobbyists argue that this decision alleviates risks to innovation, supply chain integrity, and global AI competitiveness.
However, the move is not without controversy. National security concerns arise as these chips have dual uses in consumer and military technologies. Chinese authorities have expressed suspicion about potential embedded tracking devices in U.S.-made chips, which has led to tensions and accusations in Beijing, possibly affecting the usage of Nvidia chips by Chinese firms.
The U.S. government's new policy seems less about fully abandoning export controls and more about creating a mechanism for influencing and aligning suppliers with broader political priorities. Discussions also include more state involvement in guiding technology competition, as exemplified by considerations of the U.S. government acquiring a stake in Intel.
Meanwhile, China continues to advocate for a constructive dialogue and has shown openness to progress. Delegations from both countries have met in various locations, such as Stockholm and London, for talks on their trade conflict, but without immediate results.
In a positive development, both the U.S. and China have agreed to a further delay in the implementation of higher tariffs until November 10. This extension avoids an escalation of trade tensions for the time being.
The U.S. has gradually increased import tariffs on Chinese goods to up to 145 percent, and China has retaliated with tariffs of up to 125 percent and imposed export controls on strategically important raw materials. Unlike many other countries, China reacted to the U.S. tariffs with immediate retaliatory tariffs from the start.
A direct meeting between U.S. President Donald Trump and Chinese President Xi Jinping is considered crucial to set political guidelines beyond technical details. The announced extension and the readiness for substantial progress, as indicated by a commentary in the state-run "People's Daily", suggest that both parties are eager to find a resolution.
In summary, the current U.S.-China trade negotiations on AI chip exports involve a carefully calibrated reopening of sales to China with strict customer authorization, balancing economic benefits against strategic security concerns while creating a new policy framework for controlling technology exports. The negotiations are ongoing, and a resolution that addresses the concerns of both parties is yet to be reached.
[1] Source: Reuters, Bloomberg, and CNBC [2] Source: The Wall Street Journal and The New York Times
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