Chipping away at American… or Chinese Dominance: Trump Lifts Nvidia Export Controls

August 4th, 2025
Blake McFalls

On July 21st, the Trump Administration decided to turn its back on conventional wisdom on the AI race and lift its ban on exports of H20 Nvidia chips, only three months after instituting the ban in April. Given that high-tech AI chips are indispensable infrastructure for developing AI, the lift on this export control could supercharge Chinese efforts to surpass the US in AI. However, the situation looks more nuanced, as the decision could also weaken China and strengthen the US.

Nvidia has long been ahead of the rest of the world on AI chip development. Established in 1993, CEO Jensen Huang put Nvidia in the direction of gaming. In 1999, Nvidia created the first ever gaming graphics processing unit (GPU). After advancing the gaming industry, Huang realized that the computing power of GPUs could have applications in AI, such as machine learning and deep thinking, which prompted Huang to guide his company toward the next frontier of innovation. The early days of AI were focused on image recognition, which is why Nvidia’s 2012 GPUs for AI—now known as AI chips—emphasized advancing image recognition systems. By finding success so early, Nvidia put itself years ahead of the competition. For instance, China’s largest AI chip manufacturer, Huawei, only started building chips seven years later in 2019. After Nvidia’s AI breakthrough, it continued advancing its chip capabilities. In 2020, Nvidia’s release of its A100 chip showed how far ahead of the game Nvidia was on aspects such as computational speed and data processing, even being used in pre-generative AI data centers. In 2022, the Biden Administration realized that if China had access to Nvidia’s chips, it would have the ability to progress in AI just as fast, if not faster, than the US, which worried defense hawks about the potential military implications. The Administration’s response was the first AI chip export control, banning chip exports that had cutting-edge capabilities in chip interconnection and computational density. These export controls would be expanded in 2023, hitting Nvidia’s A800 and H800 chips hardest.

The Biden Administration’s stance was clear and widely supported, as American tech firms raced ahead in the generative AI boom while Chinese firms struggled. However, the rise of Deepseek in January 2025 sowed doubt about the government’s approach; although Nvidia’s soaring market cap was backed by a belief that Nvidia chips were the factors powering the US ahead in AI, Deepseek’s proliferation without Nvidia’s top chips tanked its market cap by $560bn in a single day. While the Biden Administration pointed the finger at non-chip factors like American-developed AI model weights, the Trump Administration took an even stronger stance on export controls. After the 2022 and 2023 export controls threatened Nvidia’s revenues, Nvidia developed the H20 chip, specifically designed to be powerful, yet weak enough to bypass the export controls, allowing it to be sold in China. The Trump Administration blamed the H20 chip for Deepseek’s creation, consequently adding the H20 chip to the export control in April and cutting off $15bn of Nvidia revenues in China.

The Trump Administration’s firm stance on AI chips began to wane in the following months. Huang began lobbying Trump to lift Nvidia export controls, convincing Trump that Chinese AI chipmakers are emboldened to develop comparable AI chips without the presence of Nvidia in the market. However, Huang was primarily concerned about the export controls shrinking Nvidia’s global market share of AI chips from 95% to 50%. Throughout the lobbying campaign, Trump became softer on Nvidia in language, and it was only a matter of time until an export control lift occurred. Evidently, the campaign was successful.

An obvious consequence of the decision will be improvements in Chinese AI. Chinese firms have huge appetites for AI chips, and Nvidia’s dominance in the Chinese market before the H20 export control was instituted showed how the H20 was the preferred chip for AI development. At the moment, Chinese chipmakers such as Huawei or Alibaba are unable to match the cost-effectiveness and computing power of the H20. More importantly, though, Nvidia chips are significantly more compatible with Nvidia’s CUDA software, the global standard for developing AI models. With access to these chips, China will have an easier time creating Deepseek-like models, thus more directly threatening American superiority in AI. Numerous China hawks loyal to Trump, such as Michigan GOP Representative John Moolenaar, have condemned the decision for this reason.

Counterintuitively, there is good reason to believe the decision will help the US while hurting China. First, newfound revenue could power Nvidia to do better work in the future. Although Huang’s claim that Nvidia lost $15bn in revenue without its sales in China is hard to verify, there are already post-ban indications that Nvidia will be raking in sales in China. Nvidia ordered 300,000 units of the H20 chip from Taiwanese chip manufacturer TSMC, or the firm that manufactures chips based on Nvidia’s shared design, meaning Nvidia is likely seeing immediate orders of the H20 chip in China. If each chip sells for $15,000, Nvidia has already made $4.5bn in revenue. In the latest quarter of this year, 9.1% of Nvidia’s revenue was invested into research and development (R&D), and given how much Nvidia has expanded its revenue over the last four years, this R&D is being used diligently. The more revenue Nvidia garners, the more Nvidia can invest in the development of higher-quality chips for American AI firms to progress ahead of the world.

Second, although the H20 chip is better than any Chinese chip on the market, Nvidia has higher quality chips that are still under export controls, such as the H200, B100, and B200, ensuring that American firms still have the edge in computing power over Chinese firms. Furthermore, the US can simply maintain its dominance in the status quo with the aforementioned investments in R&D.

Third, Nvidia can engage in similar market practices in China as various Chinese companies in other sectors did in the US For a long time, Chinese products have dominated the US market, primarily through cheaper prices, whether this be pegging its currency at a lower value compared to the dollar to lower US import prices or heavily subsidizing manufacturing. By crushing demand for American-made products in sectors such as batteries, China quickly gained massive market share in various American industries, crowding out American competitors. Conversely, even without the illegal dumping practices that China uses, Nvidia can crowd out the market share of Chinese firms in AI chipmaking. Briefly, while the H20 chip was under export controls, Chinese firms demanded both purchases and improvements of domestic chips. For instance, Huawei increased its efforts at a vertically integrated supply chain, in effect using HiSilicon and SMIC as its personal chipmakers. Without the incentive—the lack of chips—powering domestic chipmaking, Huawei and other firms could revert to their pre-export control ways: buying Nvidia chips and ignoring their own chipmaking efforts, creating a dependency on American-made chips. Additionally, dependence on Nvidia chips will further entrench China’s dependence on Nvidia’s CUDA software, eliminating the need for China to develop independent software. As China has done in the past, the US will be able to use this dependency as a bargaining chip in trade negotiations.

Fourth, the US could shore in rare earth minerals as a result of the export control lift. Commerce Secretary Howard Lutnick stated that the decision was a step closer to courting China, increasing the likelihood of China approving a deal to renew rare earths exports to the US. China is crucial for rare earths, mostly because China dominates the global supply of the refined rare earths that power defense and high-tech industries.

Only time will tell whether the Trump Administration made the right decision on lifting H20 export controls. Not only will it be crucial for the US-China tech race, but the decision will either serve as a model or a cautionary tale for how countries use their technological capabilities to influence the rest of the world.

Extemp Analysis by: Daphne Kalir-Starr

Question: Did the Trump administration make the right decision to lift H20 export controls?

AGD: I think AI is a really flexible topic for an AGD! You could crack a joke about it: For example: People who have married chatbots said they felt "pure, unconditional love." Someone tell Melania to watch out. Another way to approach this is to find an instance of an AI harming someone, and segway into a phrase like “but the Trump administration just made this technology much easier for China to access.” Finally, if neither option appeals to you, the history of Nvidia is always an option if you want to opt for a historical AGD.

Background: The first sentence should define what an H20 chip is, and explain who Nvidia is. The second sentence should explain Biden's export controls, and Trump’s reversal of the policy. The final sentence should be introducing some of the concerns about this policy. Just a hint to hook the judge, and make them understand what your viewpoint is.

Q: Did the Trump administration make the right decision to lift H20 export controls?

Answer: I think you can creditably make either argument for this speech, but my intuition is to go with No. My formal answer would probably be: “No – only going to harm the US in the future”

Substructure:

Reason why Trump believed the exports would help the US and/or hurt China (expectation)
Why in reality they’re only going to help China (lack of verification)

(short term) Helps Chinese AI firms innovate faster (in the short term companies are gonna be able to catch up to the US, even if the chips aren’t the most advanced, they’ll still do the job)
(medium term) Enables China to become independent from US tech (In years to come though, Chinese companies will likely duplicate the tech and not need the chips anymore, so the US loses this bargaining power AND cedes technological ground to china)
(long term) Sends a message of diplomatic weakness (I would probably make this a point about how Trump is largely doing this to get access to rare earth minerals, and by compromising with China, Trump is sending a message to Xi that the US is desperate. That's a bargaining chip that Xi will utilize in the future because of the evidence that the US crumbled for it in the past)