Two Governments, One Closed Chip Trade

A year ago, in Busan, Washington and Beijing paused their tariff war and left the newest Nvidia chips off the table entirely ^[1]. The administration's trade negotiator set those chips apart in two words.

The president has licensed us to ship to China, but China has blocked us from being able to ship to China. — Jensen Huang

Jensen Huang, in the same room, stated the arrangement's real bind in a single sentence.

I said (to Xi) that's really between you and Nvidia, but we're sort of the arbitrator or the referee. — Donald Trump

Washington had licensed what Beijing blocked. That was the opening condition. Over the twelve months since, the two capitals stopped pulling in opposite directions and began building the same wall from opposite ends. For Washington, the wall became a fee and a diplomatic currency. Trump announced the reopened China channel in his own terms.

I have informed President Xi, of China, that the United States will allow NVIDIA to ship its H200 products to approved customers in China, and other Countries, under conditions that allow for continued strong National Security. — Donald Trump

The cut, first reported at 25 percent of Nvidia's China chip revenue and later set at 15, went to the federal Treasury — a percentage of a foreign sale flowing to the government in place of a ban ^[2]. Export licenses were spent as currency: the same approvals helped broker an Armenia–Azerbaijan peace accord and a 300-megawatt AI factory in Hrazdan, a reversal of Biden-era blocks that had kept AI chips out of Armenia over Russian-influence concerns ^[3]. Trump cast himself as neither buyer nor seller.

We’re not talking about the Blackwell. — Donald Trump

Throughout, the frontier never opened — Blackwell stayed fenced — so the toll collected on the salable H200 class, a step behind. In January, Beijing was still the approving side of the trade. The government itself authorized Alibaba, ByteDance, and Tencent to buy more than 400,000 H200s ^[4]. The border was already telling the other story: days after Trump's mid-January managed-access approval, customs began blocking H200 entries ^[5], and by this week roughly 600,000 of the chips sat frozen in Hong Kong warehouses ^[6]. Approvals now flow only to the weaker card, the RTX Pro 5500 ^[7]. The state is filling the rest of the order book itself: in May it certified nine domestic chips — Huawei's Ascend line, Alibaba's T-Head, Biren, Hygon, and four others — as a standalone category under the Xinchuang security framework, the national import-substitution campaign, turning the procurement guide for state agencies and critical infrastructure toward homegrown silicon ^[8]. Chinese self-sufficiency in AI chips has climbed from 10 percent in 2021 to 41 percent this year, with 86 percent projected by 2030 ^[9]. Huawei's rotating chairman credits the squeeze itself as the cause.

If the US hadn't forced our country, our companies, and our industry, we wouldn't have done something like this. — Xu Zhijun

When Beijing set AI-penetration targets of 70 percent by 2027 and 90 percent by 2030 in August 2025, SMIC rose 17 percent to a record and Cambricon surged to become China's most expensive stock ^[10]. On election day this week, the same logic split the tape in one session: Hong Kong rose while Taiwan and Seoul fell hardest ^[11]. The sweep's contribution is not a new wall; it is a gavel. The scrutiny of Huang's China ties was already bipartisan before the vote — House Republicans have accused Nvidia since January of a security failure over technical help to DeepSeek now used by the People's Liberation Army ^[12], and the remote-access bill closing the cloud loophole was already moving through the House on bipartisan votes ^[13]. This week gave those same questions subpoena power. On the day of the vote, three Republican committee chairmen demanded a closed-door briefing with Huang over his meetings with an executive of Singapore's Megaspeed — the same intermediary that shows up in the Malaysia cloud-access loophole — identified by U.S. intelligence as a Chinese intelligence asset, a finding the White House was told roughly a year ago and sat on ^[14][15]. The incoming Democratic majority plans to go further and put him under oath ^[16][17]. The House China committee chair states the organizing question of the new Congress.

China's access to that sensitive U.S. tech is core to the investigative work of our three committees this Congress. — John Moolenaar

The remote-access bill, already passed by the House, now lands in a Senate the Democrats flipped ^[13]. The market's grief this week was partly for a pipeline that never existed. The $35 billion in Chinese orders for the weaker card cannot be physically fulfilled: demand runs past six million units against a 2027 global production cap of three million, partners may receive 5 to 10 percent of requested quantities, and the sales were never in Nvidia's forward guidance ^[2]. The reopened channel's only physical residue is the 600,000 H200s sitting in Hong Kong. The sweep did not cause the two walls. It synchronized them. The correction predates the vote — Nvidia shed $400 billion in February on bubble fears and fell again in June ^[18][19] — and the demand signals have not cracked. Bank of America sees no order cuts ^[20], and Huang's own demand language has not softened.

If you look at the fundamentals, the demand for the neoclouds is off the charts. — Jensen Huang

The physical copper market says the opposite of what the futures priced: Shanghai stocks fell to a three-year low while the import premium hit a record $210 a ton ^[21]. The analysts who read the week as solvency rather than demand have the cleaner case ^[22].

The risk is not weakening AI demand, but rising financial obligations ahead of proven monetisation, making funding discipline and returns on invested capital increasingly critical. — Anand Rathi

Beijing's wall is ten months old, and the remote-access bill was bipartisan before the vote. Neither capital needed the vote to build its half; the vote is what brought the two halves into the same room. Huang, the year's toll-payer, is now volunteering to count every deployment himself.

We've studied all their deployments of our GPUs and counted every one. — Jensen Huang