Imposes a 15% customs duty on chip exports to China and prohibits sales of top-tier chips
The United States has imposed export restrictions on high-end AI chips sales to China since 2022, aiming to preserve national security and AI leadership. However, these restrictions have not deterred China's advancement in the field.
The Chinese government's response to the U.S. export restrictions is a part of their efforts to reduce reliance on foreign technology. Notably, the Biden and Trump administrations have imposed limits on exporting high-end GPUs to China, but allowed sales of older or less capable models that comply with these controls.
One such compliant chip is the Nvidia H20, which was authorized for sale to China after negotiating a revenue-sharing deal with the US government. This move, however, has been criticized for mixing national security with revenue deals. Despite bans on H20 chip exports from April to July 2025, Chinese AI firms like DeepSeek made significant AI breakthroughs, demonstrating that bans did not stop Chinese advancement but instead impacted US economic competitiveness.
Chinese companies have responded by increasingly developing their own AI chips and circumventing controls via smuggling Nvidia GPUs worth over a billion dollars in three months, as well as exploiting loopholes related to cloud-based chips hosted outside China. Analysts warn that overly aggressive bans backfire by accelerating China’s self-reliance on AI chips, risking erosion of US AI leadership in the long term.
The manufacturing of these American chips, including the H20, takes place in Taiwan, a country that China considers its territory. Despite the bans, the U.S.-China relationship remains good, with the American President open to a potential long-term deal for the most advanced chips.
Nvidia dominates the market for graphics processors crucial for artificial intelligence development, with AMD having a significant, though smaller, presence. The most advanced chips from American companies, including Nvidia's Blackwell, are manufactured in Taiwan. The tariffs imposed on the sale of these high-end AI chips to China have not been revoked.
In summary, US export controls on AI graphics processors to China currently allow limited sales of mid-tier chips under revenue-sharing arrangements but block leading-edge GPUs. Chinese firms have adapted by boosting domestic chip development and circumventing controls via smuggling and overseas access, thus mitigating the impact of US restrictions on their AI progress.
- In response to the US export restrictions, the Chinese government is actively working towards reducing reliance on foreign technology, particularly in the area of artificial intelligence, by developing their own AI chips.
- The US export controls on AI graphics processors have led to an increase in the smuggling of Nvidia GPUs and the exploitation of loopholes related to cloud-based chips, suggesting that these measures may accelerate China's self-reliance on AI chips at the potential cost of US AI leadership in the long term.
