Former Officials: US Easing of China Chip Controls Complicates Talks With Japanese, Dutch

Trump earlier this year announced plans to approve exports of the less advanced Nvidia H20 chips, which former officials and policy analysts warned could backfire the next time the U.S. tried to convince allies to restrict their advanced technology shipments to China (see 2507160046). Trump’s latest announcement, which outlines plans to allow Nvidia to ship the H200, further undercuts those U.S. arguments, said Michael Horowitz, a senior fellow for technology and innovation with the Council on Foreign Relations, speaking on a call with reporters this week.

“In a world where the Trump administration is willing to export more and more advanced chips to China, and where it’s making clear to allies and partners in other areas that it’s all about the money,” Horowitz said, it’s unclear whether allies, over time, will “still be willing to restrict the export of some of those advanced pieces of equipment to China.”

Chris McGuire, a CFR senior fellow for China and emerging technologies, said this issue is “something to take very seriously.” He said the H200 chip is six times better than the best chip currently available to China and “nine times higher than export controls,” which may signal to U.S. allies that it’s OK to loosen their own restrictions.

McGuire noted that the U.S. was only able to convince the Dutch and Japanese -- which house the world’s leading chip equipment manufacturing companies -- to impose more export controls against China after the U.S. itself first expanded controls over its own advanced chips during the Biden administration.

“It was really important for the United States to first put controls on advanced chips, because until we did that, allies would go to us and say, ‘why should we control the equipment to prevent China from making the best chips when they’re just going to then turn around and buy the chips from you?’” said McGuire, former deputy senior director for technology and national security at the National Security Council from 2022 to 2024.

“If we walk back from where we are on the chips side of it,” that “makes it harder to take seriously, and also undercuts one of the core arguments” for the controls, he said. McGuire also said the U.S. isn’t helped by the fact that there appear to be “kickback arrangements” associated with the exports, because Trump has said Nvidia agreed to give a percentage of its sale revenue to the U.S. government.

But McGuire also said the U.S. might be able to use its extraterritorial controls -- such as the foreign direct product rule -- to keep foreign-made advanced semiconductor tools from being exported to China, even if the Dutch, for example, were to lift its restrictions.

“The administration would have the ability to say, ‘sorry, we’re going to extraterritorially control the tool because it has U.S. tech in it that we’re not going to let go,” he said. “That might be a very unpopular decision with allies. It might also be logically inconsistent. But it is not a move that would be inherently off the table.”

Horowitz, who held senior roles in the Pentagon from 2022 to 2024, was critical of the broader decision to allow the H200 exports, saying the move “is almost the definition of an own-goal when it comes to a policy change,” and it reflects a more “dovish approach toward China” within the administration. He said he expects Beijing to use the announcement to push for access to even higher levels of chips, including potentially a version of Nvidia’s Blackwell chip.

“I would expect China to attempt to figure out how to use the leverage they have gained here from this unilateral concession to make a play for the Blackwell chip sooner rather than later,” Horowitz said.

He also said the inconsistency of the U.S.-China relationship means there’s no guarantee that this new chip policy will remain. “Change is more likely than continuity when it comes to many things that the Trump administration has done, particularly given what can be a very back-and-forth relationship between Trump and Xi” Jinping, he said. “So I think that even though industry may be sort of cheering today the possibility of greater exports, it’s entirely possible that there’ll be reversals tomorrow.”

Rush Doshi, also a CFR senior fellow and former deputy senior director for China and Taiwan during the Biden administration, pointed to DOJ’s indictment this week against several people for illegal exports of H200 chips to China (see 2512090022), which was published the same day Trump announced he planned to approve exports of those chips. He said the timing of the indictment suggests that various parts of the government might not be acting in concert.

“The president’s staff has been much more competitive and confrontational on China policy, certainly in the first term, a little bit in the second term, than the president has been,” Doshi said. The decision to approve exports of the Nvidia chips was likely taken “by the president, with a few aides telling him it’s a good idea. But I bet a significant amount of that administration is opposed to this policy, including many of the Cabinet officials who are currently not so vocal about it.”

Doshi also questioned the broader timing of Trump’s announcement, calling it the “most significant change on technology policy probably in about seven years.” He noted that Trump tweeted that the exports will lead to more American jobs and greater innovation, but Doshi said all the H200 chips will be made in Taiwan-based fabrication facilities. Doshi also said all the revenue Nvidia will earn from these sales was “already available” through sales to American firms.

“Why is it that the Trump administration has made this move? What exactly convinced them that now is the time to export these chips, especially when the gap between American compute and Chinese compute is growing? Why throw away that advantage?” Doshi said. “I’m not sure the administration yet has much of an answer.”