Trump's fab plan to let Nvidia chip into China again hides a ‘rare' agenda
A lot, if you're following Donald Trump's logic.
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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.
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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.
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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's return to China
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.
Rare earths: The hidden pressure point
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.
Washington's U-turn
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
DeepSeek's rise, and the AI arms race
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.
Why H20 matters more than specs suggest
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.
A pattern of weaponised tech
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.
India's delicate dance with tech power plays
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.
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