Consider two statements of fact. First, the United States has a lead on artificial intelligence, but allowing the sale of advanced semiconductors could allow China, its biggest adversary, to catch up. Second, the U.S. has imported more goods than it has exported every year since 1976.
According to President Donald Trump, one of these items is no big deal and the other constitutes “an unusual and extraordinary threat to the national security and economy of the United States.” If English words meant what the dictionary says they mean, that would be Item No. 1. But this is politics, and Trump announced this week that he will allow the export of Nvidia’s H200 chips to China.
If the government is setting trade policy based on national security considerations, as the administration insists it is, there’s indisputably a stronger case for blocking advanced chip sales to China than for taxing Americans extra when they buy Canadian car parts, South Korean dishwashers or Swiss pharmaceuticals.
China has an edge in three elements key to controlling AI: the ability to generate electrical power, the number of engineers and its defense industrial base. But the U.S. maintains a lead for now because it has significantly more computational ability thanks to its high-quality chips. The Institute for Progress, a D.C. think tank, estimates that the U.S. advantage over China in AI compute next year will diminish from around 10 times to five times if they have H200 chips. China cannot manufacture enough AI semiconductors to meet domestic demand because the West has restricted the sale of the highest-end lithography machines needed to produce them.
Ironically, just hours before Trump’s announcement on social media, the Justice Department announced the government shut down a smuggling network that has sought to smuggle more than $160 million worth of Nvidia chips, including H200s, to China. “These chips are the building blocks of AI superiority and are integral to modern military applications,” U.S. Attorney for the Southern District of Texas, Nicholas J. Ganjei, said in a statement. “The country that controls these chips will control AI technology; the country that controls AI technology will control the future.”
The H200s are not Nvidia’s most sophisticated chips, but they’re still more advanced than anything currently on the Chinese market. The Trump administration still needs to formulate administrative rules and issue licenses to allow the purchases. It’s unclear how many chips China will even allow to be sold because the government is eager to champion home-grown competitors to Nvidia, namely Huawei. Defenders of Trump’s announcement argue that the chips won’t get used for military applications because the Chinese government doesn’t trust U.S.-made technology. But it’s notoriously difficult to track what happens to technology once it’s in China.
Even diehard free traders acknowledge the need for exceptions. No one thinks the U.S. should sell missiles to its enemies. But hawks on Capitol Hill argue that giving the last generation of chips to China is not meaningfully different from selling previous generations of fighter jets. The hawks may not be wrong. Yes, these chips are less advanced, but they still have a lot of firepower and can do a lot of damage when cobbled together. And China keeps showing a desire to use these tools against us: Anthropic recently alerted the public that it caught a Chinese state-sponsored group manipulating its Claude Code tool to execute cyberattacks.
Perhaps the export controls first imposed by the Biden administration were bad policy. Experts have been wrong before. But there are reasons to be skeptical of Trump prioritizing commerce over national security. He seems desperate for detente with China after Xi Jinping threatened to cut off rare-earth minerals. More important, Nvidia CEO Jensen Huang is the charismatic founder of the world’s most valuable company, and he’s developed a rapport with the president. On top of that, Trump wants to tax the chip exports to China at 25 percent, which is prohibited by the Constitution.
Protectionists always want to stretch the national security rationale to include vast categories of goods, such as steel and aluminum. The president has expanded it to include all imports.
Protectionists imagine government officials laser-focused on the national interest. In reality, the most protectionist president in 100 years, overseeing an administration staffed with true believers, has invoked national security to put tariffs on toys, food and clothing while going out of his way to permit the export of high-end technology to China. At some point, it’s the theory that’s wrong.
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