Trump's U-Turn On Nvidia Spurs Talk Of Grand Bargain With China

Only a few years ago, the Biden administration declared export controls a “new strategic asset” to help the US maintain “as large a lead as possible” over China in advanced technology. President Donald Trump is now upending that approach.

In a reversal this week, the White House told chipmaker Nvidia Corp. it could soon resume sales of its less advanced China-focused H20 artificial intelligence accelerator. Advanced Micro Devices Inc. received similar assurances from the US Commerce Department.

Explaining the decision, Commerce Secretary Howard Lutnick said the administration wanted Chinese developers “addicted” to American technology, while insisting the US wouldn’t sell China “our best stuff.” That, he said, required a more balanced policy that would keep the US “one step ahead of what they can build so they keep buying our chips.”

The shift in strategy, which angered China hawks in Washington, raises a key question as Trump sets the stage for a meeting with Chinese President Xi Jinping later this year: How far will the US go in rolling back a range of measures restricting business between the world’s biggest economies imposed in the name of national security?

“The apparent loosening of export control on the H20 chips could be a sign of things to come,” Kevin Xu, a tech investor and founder of US-based Interconnected Capital who formerly worked in the Obama administration. “A wide range of bargaining chips are on the table now for a potential US-China tech grand bargain: Semiconductor manufacturing equipment, rare earths, battery technology, AI chips, even mutual market access.”

While the US is a long way off from dismantling the bulk of restrictions on China, spanning everything from export controls to investment curbs to sanctions, Trump’s recent actions open the door to redefining the economic relationship between the nations mere months after his imposition of 145% tariffs took them to the brink of decoupling. Talks in Geneva and London then led to a truce in which the US agreed to lower tariffs and ease export controls in return for rare-earth magnets used to make goods like smartphones, electric vehicles and high-tech weapons.

Even though Trump’s first term changed the conversation in Washington to focus on the threat posed by China, the US president has always been transactional and less rigid on traditional national security issues. Trump has downplayed privacy issues over TikTok and on the campaign trail made comments welcoming Chinese automakers to build plants in the US.

“He is not ideologically fixated on the need to have controls everywhere,” said Dominic Chiu, a senior analyst at Eurasia Group. “So, if he sees that as a bargaining chip that he can use to gain concessions from China on rare earths and other things, then he would do it.”

The move adds to the goodwill built over a recent flurry of diplomacy, including a cordial meeting between US Secretary of State Marco Rubio and Chinese Foreign Minister Wang Yi in Malaysia. Treasury Secretary Scott Bessent, who led the previous trade talks, expects to meet his counterpart, Vice Premier He Lifeng, within “the next couple of weeks” and has signaled the US will likely extend an Aug. 12 deadline for the snapback of sky-high tariffs.

The two sides are now inching toward what could be a series of agreements, if not a single grand deal, ahead of a potential leaders’ meeting that analysts speculate could happen around the Asia-Pacific Economic Cooperation summit that kicks off in late October in South Korea. 

After meeting his Chinese counterpart last week, Rubio said such a sit-down was likely without suggesting a time frame, saying the two sides will have to “build the right atmosphere and the right deliverables.”

For the Trump administration, the objectives may look a lot like the president’s first-term playbook: securing large-scale Chinese purchases of American goods to address the persistent trade deficit. He may also demand more Chinese action to curb the flow of fentanyl precursors — an area where Trump on Wednesday praised Beijing for already making “big steps.” 

Washington is also seeking a resolution to the future of video app TikTok’s US operations and assurances that Beijing won’t weaponize its control over rare earths and other critical minerals. China, for its part, has an ambitious wish list. Among them is the complete rollback of US tariffs, including the 20% duties linked to fentanyl and the legacy tariffs from Trump’s first term that were upheld by Biden. 

Beijing may also push for an easing of investment restrictions and, crucially, further concessions on US export controls, which it views as a direct attempt to stifle its technological advancement.

Kurt Tong, a former US consul general in Hong Kong and a partner at The Asia Group, said while Biden adopted a non-negotiable “small yard, high fences” approach to technology, Trump has a different focus and is looking to show his transactional tack can bring results for the American people.

“He cares about trade, deficits, investment in the United States and getting along with China,” Tong said.

That could make welcoming Chinese investment in the US — which would also help rebalance bilateral trade — an appealing notion to Trump, as he alluded to in his campaign remarks.

“In general, in this town, that is a forbidden suggestion,” said Washington-based Gerard DiPippo, associate director at the  RAND China Research Center. “However, if there’s one president who might go for it, it’s Trump.”