Nvidia deal signals Trump’s shifting priorities

US President Donald Trump has approved previously banned exports of Nvidia’s powerful H200 artificial intelligence chips to China. In return, the the United States government will receive 25% of the sales revenue, in what has become a hallmark of his administration.

This is Nvidia’s second-most powerful AI processor. It’s roughly six times more capable than the H20 chips previously available to buyers in China. These aren’t consumer gadgets powering the latest cat meme generator or helping you with the weekly pub quiz.

They are the computational engines behind advanced AI systems that increasingly drive autonomous weapons. This includes drone navigation systems, automatic gun emplacements and targeting algorithms in modern warfare.

Think less the futuristic world of the Terminator movies, more the very real AI-powered targeting systems already being deployed, including in Ukraine and Gaza.

At the end of a year that has seen Washington and Beijing locked in a bitter trade war in which Trump lifted tariffs on China as high as 145% at one point, the decision to allow these sensitive exports is stunning.

Advanced semiconductors

The policy reversal fundamentally challenges how export controls work. It also raises urgent questions for US allies such as Australia, caught between economic dependence on China and deepening defense alignment with an increasingly unpredictable United States.

Having access to advanced semiconductors is crucial in the global race toward advanced AI. In 2022, the Biden administration put strict semiconductor export controls in place. These rules targeted state-of-the-art AI chips and chip-making equipment destined for China.

This was dubbed the “small yard, high fence” approach. The aim was to restrict, or build a “high fence” around a narrow range of sensitive technologies, while still allowing broader trade.

The Biden administration placed 140 Chinese entities on export blacklists. It also restricted 24 types of manufacturing equipment and banned American engineers from supporting advanced Chinese chip facilities. These measures had real impact.

Between 2022 and 2024, Chinese AI companies struggled to access needed computing power, forcing them to innovate with older hardware.

Trump’s approach is fundamentally different. In July, his administration allowed Nvidia to sell H20 chips to China in exchange for 15% of revenues. This was widely seen as a concession to Beijing linked to negotiations over US access to rare earth minerals.

Yet his latest move to approve the far more powerful H200 chips for export to China reflects a decision to abandon the rulebook on trade. Strategic security decisions are being transformed into transactional “deals” where everything has a price.

AI chips now power targeting systems, guide munitions and make split-second decisions on battlefields worldwide. Ukraine’s forces use AI-equipped drones that autonomously navigate the final approach to targets, even in heavily jammed environments.

According to a Guardian report, Israel’s “Lavender” AI system identified 37,000 Hamas-linked targets, accelerating airstrikes but reportedly contributing to significant civilian casualties.

China’s People’s Liberation Army is reportedly deploying AI for drone swarm coordination, autonomous targeting, and battlefield decision-making. The Pentagon’s Project Maven synthesizes satellite and sensor data to suggest targets for US forces.

Attack drones

This isn’t science fiction – it is today’s battlefield reality. Modern chips are “dual-use” technologies. They can train AI chatbots and guide cruise missiles. The same microcontrollers regulating washing machines can navigate attack drones.

British researchers have found a significant number of foreign components in Russian drones used in Ukraine have come from the United States and Europe. Some were literally harvested from household appliances.

Russian procurement networks reportedly bought chips intended for repairing washing machines, erased the manufacturer’s name with acetone and inserted them into kamikaze drones. These components travelled through third countries such as India and Kazakhstan.

You can’t ban washing machines without crippling consumer economies. But washing machines contain microcontrollers perfect for military drones. Export bans can become an elaborate game of whack-a-mole, where each restriction spawns new workarounds.

As a consequence of joining the AUKUS security partnership, Australia has restructured its export control regime to align with US priorities. But the country is in something of a bind. China accounts for about 30% of Australia’s total merchandise trade.

Meanwhile, Washington increasingly demands policy alignment as the price for accessing its defense technology. So, what does US relaxation on chip export controls mean for Canberra? Are we obligated to follow?

Australia’s alignment with AUKUS was grounded on partners sharing similar views, and adopting a consistent response. But the US’ recently released National Security Strategy identifies migration to Europe as a bigger “civilizational” danger than Russia’s military threat.

National security

Clearly, Australians see this very differently. Export controls work when they’re consistent, predictable, and clearly tied to national security. They fail when they become bargaining chips or revenue generators.

Trump’s H200 deal transforms the “high fence” around sensitive technologies into a turnstile for the right price.

There are pressing questions for Australia. Do Washington-aligned export controls serve Australian interests? Or are we outsourcing sovereignty to a partner whose decisions are increasingly arbitrary and transactional?

Peter Draper is a professor, and executive director of the Institute for International Trade and director of the Jean Monnet Center of Trade and Environment at the University of Adelaide in Australia. Nathan Howard Gray is a senior research fellow of the Institute for International Trade at the University of Adelaide.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.