Nvidia's AI Chip Sales to China Resume Amid US-China Rare Earth Trade Negotiations

Nvidia's resumption of H20 chip sales related to rare earth element trade talks | TechCrunch

Rare earth elements appear to be behind Nvidia's stance on China. After announcing in June plans to essentially withdraw from the Chinese market, the semiconductor chip and AI giant reversed course and said it was filing an application to restart sales of its H20 AI chip to China. U.S. Commerce Secretary Howard Lutnick said Tuesday that Nvidia's plans to start selling its H20 AI chips are tied to ongoing trade discussions with China regarding rare earth elements, according to reporting from Reuters. AMD plans to restart sales of its MI308 AI chip in China too. Rare earth elements (REE) like lanthanum and cerium, and which are largely mined in China, are necessary components in technology, including rechargeable batteries for electric vehicles. These REEs have become a critical point in the current trade debates between the U.S. and China. Not everyone is happy with this trade development though. The decision "would not only hand our foreign adversaries our most advanced technologies, but is also dangerously inconsistent with this administration's previously-stated position on export controls for China," Congressman Raja Krishnamoorthi, said in a statement, according to Reuters. But Lutnick isn't concerned and told CNBC on Tuesday that China is only getting Nvidia's "fourth best" chip. "We don't sell them our best stuff, not our second best stuff, not even our third best," Lutnick said in the interview. This news comes less than a week after it was rumored that Nvidia would be designing and releasing a new AI chip specifically for the Chinese market to resume business in the country without violating U.S. chip export rules. The U.S. is still trying to figure out what its AI chip export rules are going to look like. The Trump administration formally rescinded the Biden administration's AI Diffusion Rule in May and there hasn't been a formal update since. The Trump administration was rumored to be considering further restrictions on AI chip exports to countries like Thailand and Malaysia, to prevent smuggling, Bloomberg reported last week. Malaysia implemented trade permits on U.S. made AI chips on Monday.

The US squeezed Nvidia's AI chip export deal with China into negotiations over important rare earth elements, bizarrely claiming 'we put that in the trade deal with the magnets'

News broke earlier this week that Nvidia was filing applications to sell its H20 AI GPUs in China once more, and that the US government had assured it that a license to sell the high-powered hardware would be granted. Now we're learning a little more about how this arrangement might work, and it turns out it's part of a new US/China trade deal on the import and export of rare earths. Or, to quote US Commerce Secretary Howard Lutnick speaking to Reuters, "We put that in the trade deal with the magnets." While the agreement does appear to include the specific lifting of an export ban on magnets, it's the rare earth metals that are almost certainly the bigger prize on the table here. On June 11, US and Chinese representatives finalised the new deal, which, according to President Trump, includes an agreement from Beijing to resume exports of "any necessary rare earths" (and "full magnets") to the states, while the US would back off from its previous threats to revoke the visas of Chinese students. And, according to Lutnick, it would also enable China to buy Nvidia's high-end AI chips once more as part of the same package. China has an estimated reserve of 44 million metric tons of rare earths, a group of 17 metallic elements that are absolutely essential for the production of modern electronic devices. That makes the country the largest potential source of the precious elements behind Brazil, which is currently estimated to have a reserve of 21 million metric tons. The United States, however, is estimated to have a reserve of 1.9 million metric tons, provided by a single operational mine located in Mountain Pass, California. Here we reach something of a thorny point in the Trump administration's "America first" ideology: While the US is arguably capable of providing for itself in many respects, rare earths in relation to electronics manufacturing is not currently one of them. So, a deal appears to have been struck, which stands in stark contrast to both the Trump administration's tariff policy so far (China being hit far harder by the wave of tariffs than any other nation) and, it seems, the prior Biden administration's restrictions on the export of high-end AI hardware. Bundling the two together in the same deal makes a whole lot of sense, I suppose, particularly if a tit-for-tat arrangement is potentially underway. China wants high-end AI hardware, the US wants rare earths, and both, of course, want to prosper well into the future when it comes to cutting edge tech. Trump appears keen to revive the US electronics and chipmaking industry, but without the rare earth imports to do so, it'd likely be a plan that struggled to get off the ground. Commerce secretary Howard Lutnick, on the other hand, is believed to be one of the key architects behind the Trump administration's... unusual approach to tariff structuring. Previously known as an American businessman and philanthropist, he was recently criticised during a congressional hearing for steadfastly holding to his view that building and producing products in America would result in paying no tariffs, despite protestations from congresswoman Madeleine Dean that "we can't produce bananas in America." For the purpose of balance, I will point out that a relatively small number of bananas are grown in Hawaii [PDF warning]. Anyway, aside from being listed this year as one of the world's 100 most influential people, Lutnick was endorsed by Elon Musk to be Trump's US treasury secretary after his election, before instead being picked as commerce secretary. It is believed that Lutnick was a key factor in negotiating behind the scenes with China and a number of other countries in the early days of the current administration, although some reports have indicated that many of Trump's allies are less than pleased with his current level of influence regarding the President. So, what does all this have to do with the price of fish? Well, many have speculated that Trump's apparent hardball tactics may have been an attempt to force China to the negotiating table, and rare earths in exchange for AI chips seems to be at least part of the new deal between the two. Tech really does make the world go round these days, it seems, and while Nvidia CEO Jensen Huang seems pleased as punch at the opportunity to sell to China once more, it's the rare earth side of the trade deal that might have the biggest impact on the future of the industry as whole.

Trump's fab plan to let Nvidia chip into China again hides a 'rare' agenda

The US, under President Trump, is allowing Nvidia to resume H20 AI chip sales to China, reversing earlier export bans. This decision is linked to negotiations regarding rare earth element supplies, critical for US manufacturing. The move reflects a strategy of using export controls as bargaining tools in trade talks, securing rare earths in exchange for AI chips. In April, the US banned Nvidia from selling even its watered-down H20 AI chips to China, doubling down on a strategy aimed at choking Beijing's AI ambitions. But just three months later, those same chips are headed back to China. What changed? A lot, if you're following Donald Trump's logic. The green light for Nvidia's H20 shipments is now directly linked to rare earth negotiations. Treasury Secretary Scott Bessent told Bloomberg on Tuesday that the export controls on Nvidia have become a "negotiating chip" in broader US-China trade talks, which recently led to a deal to reduce mutual tariffs. After Nvidia CEO Jensen Huang met Donald Trump last week, Commerce Secretary Howard Lutnick told Reuters, "We put that in the trade deal with the magnets." That one line says it all: export controls aren't just policy anymore; they're bargaining tools. Also Read: Nvidia's Huang says China's open-source AI a 'catalyst for progress' Additionally, Huang said on Wednesday that the company is "doing our best" to serve China's massive semiconductor market, following meetings with top officials in Beijing. Huang is in the city for the China International Supply Chain Expo, an event where China is positioning itself as a champion of global free trade, in sharp contrast to the trade turbulence triggered by US President Donald Trump. Nvidia, the world's most valuable company and the first publicly traded firm to hit a $4 trillion valuation (which it did last week), said Monday it is applying for US licenses to resume H20 GPU sales to China. The company said it has received assurances from the US government that the licenses will be approved. AMD, another major chipmaker, said on Tuesday that it too was planning to restart sales of its AI chips to China. This is a big reversal. Under the Biden administration, Washington had first built a firewall of export controls in October 2022, and then progressively raised it higher and higher. First came a ban on Nvidia's top-of-the-line H100 chips, followed by curbs on less powerful variants like the H20. Though technically compliant, the H20 was still seen as dangerous because it worked with Nvidia's CUDA software stack, the backbone of most AI development globally. In April 2025, Trump's Commerce Department formally blocked H20 shipments to China unless Nvidia obtained a special license, forcing the company to halt sales. CEO Jensen Huang had warned the move could cost Nvidia $15 billion. Also Read: Nvidia's Huang hails Chinese AI models as "world class" China generated $17 billion for Nvidia last fiscal year, 13% of its total revenue. But behind the scenes, the administration was already laying the groundwork for a trade-off. China retaliated against Trump's "Liberation Day" tariffs by halting rare earth exports to the US These 17 critical elements are essential for EVs, smartphones, and weapons, and China controls more than 80% of the global supply. That gave Beijing leverage, and now Trump is using Nvidia's pain as a bargaining chip. The outcome: a tacit agreement to allow Nvidia's chips in exchange for reopening rare earth supply lines. It's textbook Trump: maximise leverage, bend the rules when needed, and go straight for the deal. The trade détente followed China's March 2025 halt to rare earth exports, a direct response to Trump's new tariffs. The chip ban lift, in return, appears to be part of a broader deal to reopen the rare earth spigot. Reports now suggest Beijing has pledged to resume those exports. The White House, for its part, is signalling de-escalation, even as it insists that national security remains the guiding principle. The move sparked immediate backlash. Rep. Raja Krishnamoorthi, top Democrat on the House China committee, called it a betrayal of national security, reported Reuters. "This decision would hand our foreign adversaries our most advanced technologies," he said. His Republican counterpart, Rep. John Moolenaar, also demanded answers from the Commerce Department. He pointed to Chinese startup DeepSeek, an emerging AI powerhouse, as proof that even H20-level chips can tip the balance. "The H20 is a powerful chip... and played a significant role in the rise of PRC AI companies like DeepSeek," he warned. Nvidia CEO Jensen Huang defended the company's position in an interview with China's CCTV: "The Chinese market is massive, dynamic, and highly innovative... It's really important that American companies are able to compete and serve the market here." Also Read: Chinese firms scramble to buy Nvidia AI chips as it plans to resume sales The H20 is widely believed to have contributed to DeepSeek, an advanced Chinese AI model. This isn't just about chips. It's about who leads the next industrial revolution. In January 2025, DeepSeek stunned the global AI community by releasing a ChatGPT rival built on cheap hardware. By January 27, DeepSeek-R1 surpassed ChatGPT as the most downloaded freeware app on the iOS App Store in the United States, causing an 18% drop in Nvidia's share price on that day. Washington took notice, not because DeepSeek had caught up, but because it had done so without top-tier chips. Nvidia designed the H20 specifically for the Chinese market, a "second-tier" chip meant to comply with earlier export rules. But its real power lies in its software compatibility. The H20 works seamlessly with Nvidia's CUDA tools, which dominate global AI development. That makes it far more valuable than its specs suggest. Even with reduced power, it gives Chinese firms access to a world-class AI development ecosystem and allows them to piggyback on global infrastructure. Not surprisingly, demand in China is spiking. ByteDance and Tencent are reportedly applying to purchase H20 chips. However, ByteDance, in a statement to Reuters, denied that it is currently submitting applications. Nvidia hasn't confirmed details but is said to have set up an "approved list" system for Chinese buyers. Nvidia's case isn't an outlier. The US has a long history of using tech as leverage in global power plays: ASML export ban: Since 2019, Washington has pressured the Dutch government to block ASML from selling its cutting-edge EUV lithography machines to China--tools essential for advanced chipmaking. It's a textbook example of the U.S. controlling chokepoints in the global semiconductor supply chain. Also Read: Faced with geopolitics and trade war, US companies in China report record-low new investment plans Huawei and 5G: The U.S. blacklisted Huawei and ZTE, cutting off their access to American tech, and lobbied allies to exclude Huawei from their 5G infrastructure, citing security threats. Middle East "chiplomacy": In May 2025, during trips to Saudi Arabia, Qatar, and the UAE, U.S. officials reportedly offered access to advanced chips in exchange for defence deals and tech investments. It was tech used as currency. India sanctions: The U.S. recently sanctioned 19 Indian firms for allegedly supplying dual-use goods to Russia, showing how export controls are being used extraterritorially to enforce foreign policy. Export controls are no longer just about national security. They're now integral to American foreign policy. The Nvidia saga isn't just a US-China story. For India, it's a mirror, and a warning. On one side, it echoes India's past run-ins with Trump-era trade pressure. Take the Harley-Davidson dispute: Trump repeatedly criticised India's steep import duties, calling them "very unfair." The result? India lowered tariffs on premium bikes, and Harley partnered with Hero MotoCorp for local production. A trade threat turned into a manufacturing pivot. Apple offers another case in point. During Trump's presidency, the U.S. pushed Apple CEO Tim Cook to scale back overseas manufacturing and invest more at home. India, instead of backing down, doubled down, rolling out targeted Production Linked Incentive (PLI) schemes and state-level benefits. Also Read: Trump student visa curbs spark hiring push by China quant funds The result: India is now Apple's second-largest iPhone production base after China--and a major exporter to global markets. Despite political noise, India secured its place in Apple's shifting supply chain. Now, India is taking those lessons and running with them. It's racing to reduce dependence on Chinese rare earths, accelerating exploration, reopening old mines, and forging global joint ventures. At the same time, its PLI schemes are evolving into a geopolitical playbook, offering incentives to chipmakers, semiconductor toolmakers, and electronics firms to anchor supply chains in India. Nvidia's story, however, seemingly cuts both ways. It shows that compliance doesn't guarantee certainty -- that even when companies follow the rules, policies can flip overnight; export licenses can vanish, and access to entire markets can disappear with a single memo. Trump's approach to tech trade, while not exactly subtle, appears to be working. This wasn't a concession to Nvidia; it was a deal -- AI chips for magnets, under which China gets access back to Jensen Huang's GPUs, and Trump gets rare earths flowing back into US factories.