In a significant policy shift that has reverberated across global markets, the Trump administration announced on January 13, 2026, a new approach to advanced semiconductor exports, permitting the sale of cutting-edge AI chips to China under strict conditions. This decision marks a departure from a two-year blanket ban, opting instead for a transaction-by-transaction review process. The timing of this change is notable, given the escalating economic and strategic tensions between the U.S. and China, and it has already ignited a flurry of responses in both capitals.
The U.S. Department of Commerce’s Bureau of Industry and Security formally updated its export license review policy, transitioning from a “presumption of denial” to a “case-by-case review” for advanced semiconductors like NVIDIA’s H200 and AMD’s MI325X. Just a day later, the administration revealed plans to approve sales of NVIDIA’s H200 chips to China, although these sales will be subject to a hefty 25% tariff and a 50% volume cap. Administration officials claimed that this approach would allow the U.S. to capitalize on Chinese demand while safeguarding national security and technological supremacy. Nevertheless, critics have raised concerns regarding its potential impact on America’s competitive edge in artificial intelligence.
Chinese tech giants were quick to react, with companies such as Alibaba, Tencent, and ByteDance placing orders for over two million H200 chips, potentially generating up to $14 billion in revenue for U.S. semiconductor manufacturers in 2026. ByteDance, the parent company of TikTok, has prioritized the acquisition of H200 chips as a cornerstone of its AI research efforts for the upcoming year. However, these transactions will still require rigorous risk assessments and a mandatory third-party U.S. testing phase before export. Sales linked to China’s military or intelligence sectors will remain heavily restricted.
This policy shift comes amid a backdrop of increased interdependence and strategic maneuvering between Washington and Beijing. Since December 2024, China has enacted export bans on critical minerals necessary for semiconductor manufacturing, including rare earth elements and silver, which it dominates in global refining. Currently, China refines approximately 70% of the world’s silver used in chip production, giving it substantial leverage over the U.S. and its allies. These export controls have intensified U.S. pressure to ease its stance on chip exports, as American manufacturers face potential supply chain bottlenecks.
However, the risks involved with this new policy are considerable. The H200, while not NVIDIA’s most advanced offering, is still six times more powerful than any semiconductor currently available in China or produced by domestic firms such as Huawei. With access to millions of these chips, Chinese AI developers could quickly narrow the computing power gap between the U.S. and China. If the U.S. had maintained its previous export restrictions, its computational capacity would have remained ten times greater than China’s in 2026—a lead now jeopardized.
Congressional leaders are closely monitoring these developments. On January 22, 2026, the House Foreign Affairs Committee passed the AI Overwatch Act, which aims to expand congressional oversight over AI chip exports. If enacted, the bill would require both the House committee and the Senate Banking Committee to approve any advanced chip shipments within 30 days and would grant lawmakers the authority to revoke existing export licenses at any time. This introduces a fresh layer of uncertainty to the global supply chain, as licenses granted by the Commerce Department could be overturned by Congress with little warning. Although the bill is anticipated to pass in the House, it may encounter resistance in the Senate, according to forecasts.
On the other side, Beijing is proceeding cautiously. In early February 2026, Chinese regulators advised major financial institutions to reduce their holdings of U.S. Treasuries, citing “concentration risks” and “market volatility.” This directive was issued just before a phone call between President Trump and Chinese President Xi Jinping, where Trump discussed plans for a visit to China in April. While this order does not affect China’s official state holdings of Treasuries, it underscores a longstanding trend: China’s direct Treasury holdings have plummeted to $682 billion as of January 2026, a 17-year low, down from a peak of $1.3 trillion a decade prior. Reports indicate that China is adopting a more discreet approach to reducing its exposure rather than making outright asset sales.
The market has already begun to respond, with 10-year U.S. Treasury yields climbing to 4.24% on February 9, 2026, from 4.22% earlier that day, in reaction to news of China’s diminished appetite for U.S. government debt. According to Beijing officials, this shift in investment strategy reflects a belief that U.S. assets have lost their status as a safe haven amid ongoing market turbulence and what they describe as the Trump administration’s “incoherent and erratic policy approach.”
Despite the U.S. policy adjustment, China has directed its customs authorities to block imports of H200 chips and has cautioned national technology companies against purchasing them unless absolutely necessary. This move suggests that Beijing is wary of becoming strategically dependent on U.S. technology, particularly technology that could be leveraged in future conflicts. China appears to be weighing the advantages of acquiring advanced computational power against the risks of increased reliance on American suppliers.
The international implications of this policy shift are equally complex. The Trump administration’s reversal may undermine multilateral export control agreements established with allies in the Netherlands, Japan, and South Korea. Should these partners view U.S. commitments as negotiable under industry pressures, they may reconsider their own restrictions, potentially fracturing the united front that has characterized Western technology policy toward China since 2022.
In the short term, this decision is likely to enhance China’s capacity to develop advanced AI models and scale its data centers, further closing the technological gap with the U.S. Companies like NVIDIA may see commercial gains in the near term. However, experts caution that China could eventually harness H200 computing power for military applications, from AI-driven drones to enhanced cyber warfare capabilities. Armed with these chips, Chinese cloud providers may soon be poised to compete directly with U.S. giants like Google Cloud and AWS.
As the global supply chain faces upheaval and both nations wield strategic leverage, the new era of U.S.-China technology relations appears to be shifting from unilateral restrictions to transactional negotiations. Each side aims to protect its interests while exploiting the other’s vulnerabilities, leaving the world on edge as the future of AI, finance, and security hangs in a delicate balance.
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