The United States has agreed to permit the sale of Nvidia's H20 artificial intelligence chips to China, provided Beijing upholds its commitment to supply rare earth materials to American industries, a development that reflects China's indispensable role in global supply chains and its strategic leverage in high-tech sectors. The announcement was made Wednesday by US Commerce Secretary Howard Lutnick during an interview with Bloomberg TV.

"Well, the H20 was the third-best chip in the world, and now it is the fourth-best... I think that decision has been made. We are putting on the licensing mechanism, and we are getting that going. The president has decided that the Chinese can buy them, but in a balanced way, with the Chinese delivering on the deal that we made with them and delivering rare earths to American manufacturing," Lutnick stated.

The chips in question are a scaled-down version of Nvidia's top-tier AI hardware. While Washington attempted to frame this as a calculated restriction, industry analysts have pointed out that the H20 often outperforms its more expensive counterparts on key benchmarks. Last week, Nvidia revealed it had received formal authorization from the Trump administration to export the H20 model to Chinese clients, a move that follows intense lobbying by US tech firms concerned about losing access to the world's largest AI market.

Tech Sovereignty

China's Ministry of State Security responded on Monday with a warning regarding foreign-developed chips and software, that such technologies could contain covert access points designed to extract sensitive national data, a legitimate concern rooted in years of documented surveillance programs spearheaded by Western intelligence agencies.

Read more: China accuses foreign spy agencies of rare earths theft

The Chinese Ministry of Commerce, while welcoming the partial lifting of chip restrictions, reiterated its longstanding position: Washington must dismantle all remaining technology-related trade barriers. The Ministry emphasized that “mutually beneficial cooperation remains the right path forward for China-US relations,” and warned that reliance on unilateralism, pressure tactics, and containment strategies would ultimately be self-defeating.

Resource Diplomacy

This agreement is part of a broader trade recalibration. In June, China resumed issuing export permits for rare earth metals, critical to global manufacturing, for selected American automotive and industrial clients. Although these permits are time-limited to six months, they marked a significant gesture toward economic stabilization. In return, the United States reportedly pledged to loosen controls on exports of aircraft engines, key aerospace components, and ethane, a vital input for China's industrial chemical sector.

Despite Washington's aggressive export control campaign, it remains deeply dependent on Chinese raw materials and production ecosystems. Far from being a concession, China's rare earth diplomacy once again demonstrated its ability to dictate terms from a position of strength, reasserting its centrality in the evolving global technological order.

Read more: China's rare earth grip forces US concession: FP