Trump Blocks Nvidia’s Advanced Chips From China in Latest Trade Salvo

• The US-China trade agreement reserves Nvidia’s (NVDA) advanced Blackwell chips exclusively for American customers, while China suspends rare earth export controls and ends investigations into US chip firms, with US mediation on restricted chip usage.
• Tariffs on Chinese goods drop to 47% from 57%, including a fentanyl-related reduction from 20% to 10%, and the US pauses reciprocal tariffs for a year alongside canceling a planned 100% levy on exports.
• China commits to immediate large-scale purchases of US soybeans and energy, including a potential Alaskan oil and gas deal, marking a de-escalation after months of trade threats, though durability remains uncertain.

The recent agreement between President Donald Trump and Chinese President Xi Jinping marks a pivotal de-escalation in bilateral tensions, focusing on technology access, tariff relief, and targeted sector commitments. This deal, finalized during talks in South Korea, addresses longstanding frictions over semiconductors, rare earth exports, and broader trade imbalances, offering a temporary reprieve for global markets while underscoring the intricate balance of economic leverage between the two superpowers.

Central to the pact is the reinforcement of U.S. controls on advanced semiconductor technology. President Trump emphasized aboard Air Force One that Nvidia’s (NVDA) most sophisticated Blackwell chips will be exclusively available to American customers, barring access for China and other nations. “The most advanced, we will not let anybody have them other than the United States,” Trump stated, aligning with ongoing U.S. efforts to safeguard national security amid escalating competition in artificial intelligence and computing hardware. This stance builds on prior export restrictions imposed during Trump’s first term and intensified under subsequent administrations, where Nvidia’s GPUs have become a flashpoint due to their critical role in AI training models. The White House fact sheet further details U.S. mediation between Beijing and Nvidia CEO Jensen Huang regarding China’s utilization of restricted chips, aiming to clarify compliance while preventing unauthorized diversions.

In exchange, China has agreed to suspend additional export controls on rare earth metals and terminate investigations into U.S. chip companies, easing a bottleneck that has historically disrupted supply chains for electronics and defense applications. Rare earths, essential for everything from electric vehicle batteries to missile guidance systems, represent a strategic vulnerability for the U.S., which relies on China for over 80% of its supply. This concession could stabilize prices and bolster domestic manufacturing initiatives like the CHIPS Act, which has allocated billions to onshore semiconductor production.

Tariff adjustments form another cornerstone, with the U.S. pausing select “reciprocal tariffs” on China for an additional year and canceling a planned 100% levy on Chinese exports slated for this month. Overall duties on Chinese goods will decline to 47% from 57%, reflecting a pragmatic recalibration rather than outright elimination. A notable carve-out targets fentanyl-related imports, reducing the tariff from 20% to 10%, coupled with China’s pledge to intensify efforts against precursor chemical flows – a priority amid the U.S. opioid crisis that claimed over 100,000 lives last year. These modifications echo Trump’s initial 2018 tariff salvos, which ballooned bilateral duties to trillions in affected trade value, but they also highlight the limitations of protectionism in curbing illicit trade.

Sector-specific promises add depth to the truce. Trump announced China’s intent to procure “tremendous amounts” of U.S. soybeans immediately, reviving a cornerstone of agricultural exports that faltered during the 2018-2020 trade war, when U.S. farmers lost an estimated $27 billion in sales. Similarly, increased purchases of American energy were highlighted, with allusions to a potential Alaskan oil and gas deal, tapping into the U.S.’s position as the world’s top producer of both commodities. These commitments could inject billions into rural economies and energy sectors, though their enforceability remains contingent on verifiable implementation mechanisms absent from public disclosures.

Trump’s decision to forgo this week’s Supreme Court arguments on his global tariff framework further illustrates a strategic pivot toward diplomacy over litigation. “I don’t want to call a lot of attention to me,” he remarked en route from Mar-a-Lago to Washington. “It’s not about me, it’s about our country.” This approach contrasts with the aggressive rhetoric that followed his January inauguration, when renewed threats against China triggered volatility in equity markets, with the S&P 500 dipping nearly 5% in the ensuing weeks.

While this accord halts the immediate escalation of a renewed trade war – following months of market turbulence and investor unease – its longevity hinges on mutual adherence. Historical precedents, such as the fragile Phase One deal of 2020, suggest that geopolitical flashpoints like Taiwan or intellectual property disputes could unravel progress. For Nvidia and the tech sector, the exclusivity on Blackwell chips fortifies U.S. innovation edges but risks retaliatory measures from Beijing, which has accelerated domestic chip development through initiatives like Made in China 2025. Broader economic ripple effects may include moderated inflation from lower tariffs and enhanced supply chain resilience, yet the underlying asymmetries in trade surpluses persist, demanding vigilant oversight to sustain this fragile equilibrium.

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