U.S. Chip Policy on China: A Flawed and Unstable Approach

The yes-then-no approach the U.S. Government has taken to chips exports to China is again a yes. Sort of. But make no mistake, this is no time for any U.S. company to throw a party.

On January 13, the U.S. Government gave the green light to AI chip firm Nvidia to export its powerful H200 chips to China, a move that the company lauded for striking “a thoughtful balance that is great for America.”

One reason it is “great” for America is that any sales include a 25-percent fee that must be paid to the U.S. Government. Let’s also acknowledge that the decision is great for Nvidia. Remember, it was just three months ago that its CEO lamented that the company had seen its “95-percent market share” in China collapse because of restrictions the current U.S. president and his predecessor had placed on its sales to China.

But does the enthusiasm surrounding Nvidia need to be tempered? Simple answer: Yes. First, the company’s most valuable chip remains off the table to the Chinese market. Next, as the International Business Times newspaper reported, China’s commitment to domestic chip development, which is showing legitimate success, might mean there is no need for a flood of foreign products, regardless of how sophisticated they might be. In analyzing that success, The Economist recently stated that in 2026 “Chinese firms will push ahead in two areas long thought beyond their reach: designing and manufacturing powerful AI chips.” The reality is that China’s steady approach to chip development, including ignoring short-term stock prices in favor of long-term production strategies, is bearing fruit.

Meanwhile, while the renewed support for the export of chips to China should be celebrated in the U.S., the reality is that much of the country’s political elite remains unnaturally afraid of China and its aims. The nonstop rhetoric that China is an existential threat to America’s national security and the global world order should lead to head-shaking reactions. But when one realizes that illogical policy decisions often follow—think the Chips Act that U.S. political leaders celebrated just a few years ago and that has significant shortcomings—that fear carries real consequences. Let’s not mince words here: The futile effort to contain China should be kicked to the curb and replaced with a commitment to honoring American and Western values.

Recognizing that, it was no surprise when Liu Pengyu, a spokesperson for the embassy of China in Washington, D.C., noted that any attempt at “blocking or restricting China” damages all parties and such an approach “does not serve the common interests of both sides.”

And do not forget that chips are not the only point of tension. Roughly one in three members of the U.S.-China Business Council confirmed last year that declining market share in China is hurting their bottom line but also strategic planning.

China is operating under a positive mindset, one based on a foundation of constant refinement of the domestic chip market and many other areas associated with high-quality development. As those areas strengthen, they become more immune to reckless U.S. policies. On the other hand, the U.S. is hamstrung by an inconsistent approach to exporting chips, not to mention trade in general, and a corresponding chronic negativity about China and its growing respect on the international stage.

Businesses want stability; they are justifiably hesitant to plan, to hire, to focus more and more on research and development when the ground upon which they work seems to always shift. China is eager for such rock-solid foundations. Sadly, America is not.

Free trade and the endorsement of strong supply chains are predicated on bringing nations and peoples together. Washington would be wise to remember that as it debates the (flawed) merits of allowing hostility to dictate policy.