Donald Trump launched his political career by insisting that free-trade deals had sacrificed the national interest in the pursuit of corporate profits. One wonders what that version of Trump would make of his most recently announced trade policy. On Monday, he declared on Truth Social that the United States would lift restrictions on selling highly advanced semiconductors to China. In doing so, the president has effectively chosen to cede the upper hand in developing a technology that could determine the outcome of the military and economic contest between the U.S. and its biggest geopolitical rival.

The U.S. is currently ahead in the AI race, and it owes that fact to one thing: its monopoly on advanced computer chips. Several experts told me that Chinese companies are even with or slightly ahead of their American counterparts when it comes to crucial AI inputs, including engineering talent, training data, and energy supply. But training a cutting-edge AI model requires an unfathomable number of calculations at incredible speed, a feat that only a few highly specialized chips can handle. Only one company, the U.S.-based Nvidia, is capable of producing them at scale.

This gives the U.S. not only an economic advantage over China, but a military one. Already, AI systems have revolutionized how armies gather intelligence on enemies, detect troop movements, coordinate drone strikes, conduct cyberattacks, and choose targets; they are currently being used to develop the next generation of autonomous weapons. “Over the next decade, basically everything the military and intelligence communities do is going to some extent be enabled by AI,” Gregory Allen, who worked on the Department of Defense’s AI strategy from 2019 to 2022, told me. This is why, in October 2022, the Biden administration decided to cut off the sale of the most advanced semiconductors to China. The aim of the policy, according to the head of the agency in charge of implementing it, was “to protect our national security and prevent sensitive technologies with military applications from being acquired by the People’s Republic of China’s military, intelligence, and security services.”

Rogé Karma: Something ominous is happening in the AI economy

The policy seems to have done its job. Chinese AI firms tend to explicitly cite export controls as one of the biggest obstacles to their growth. DeepSeek, the Chinese company that earlier this year introduced an AI model nearly as good as those made by the leading American firms, is the exception that proves the rule. At first, DeepSeek’s progress was taken as evidence that restricting China’s access to advanced chips was a failed project. However, the company turned out to have trained its model on thousands of second-tier Nvidia chips that it had acquired via a loophole that wasn’t closed until late 2023. DeepSeek’s AI model would have been even better if the company had had access to more and better Nvidia chips. “Money has never been the problem for us,” Liang Wenfeng, one of DeepSeek’s founders, told a Chinese media outlet last year. “Bans on shipments of advanced chips are the problem.”

At first, Trump seemed eager to tighten the Biden-era restrictions even further. In April, his administration banned the sale of Nvidia’s H20 chip, which the company had designed specifically to sell to China without violating the export ban. But in subsequent months the balance of power in the White House began to tilt toward advisers who were skeptical of export controls, notably Trump’s AI czar, the Silicon Valley investor David Sacks. Meanwhile, Trump began meeting regularly with Nvidia CEO Jensen Huang—who, somewhat understandably, didn’t love that his company was being deprived of the Chinese market. In July, Trump reversed course and lifted restrictions on the H20 chip. And this week, he went even further by removing the ban on the far more powerful H200, Nvidia’s second-best chip.

“This policy will support American Jobs, strengthen U.S. Manufacturing, and benefit American Taxpayers,” Trump declared in his Truth Social post. The strongest case for the shift goes something like this: Restricting the sale of American chips would simply encourage Chinese companies like Huawei to develop their own. Selling chips to China, by contrast, would undercut Chinese chipmakers and keep its AI firms dependent on American technology. Meanwhile, as long as the U.S. maintained controls on the most advanced chips, Chinese AI firms would remain behind. “We are not selling the latest and greatest chips to China, but we can deprive Huawei of having this giant market share in China that they can then use to scale up and compete globally,” Sacks said at an event in July, defending Trump’s decision to lift the H20 ban. “The policy is nuanced and it makes a lot of sense.”

It does not, in fact, make a lot of sense. China is nowhere close to producing chips as advanced as America’s. “This is the most complex device made by most complex machines depending on most complex supply chains in all of human history,” Chris McGuire, a senior fellow at the Council on Foreign Relations and one of the architects of the Biden administration’s export controls, told me. “China is great at making things, but this may just be the one thing they can’t.” According to McGuire’s analysis of Huawei’s own projections, by the end of this decade the Chinese giant still won’t be capable of producing a chip on par with what Nvidia is producing today.

Even if China could one day produce highly sophisticated chips, there’s no evidence that lifting export controls will slow down the country’s effort to do so. In response to Trump’s latest decision, Beijing reportedly plans to limit access to H200s to only the companies that can convincingly justify why they need these foreign chips rather than domestic ones. According to Saif Khan, who served in Joe Biden’s National Security Council, American exports will allow Beijing to bring in just enough foreign chips to enable it to stay competitive in the AI race while continuing to provide state assistance to its own local chip producers. “We’re basically handing them a lifeline,” Khan told me.

Moreover, although the H200 is technically the second-best Nvidia chip, it is still nearly six times more powerful than the H20, the best chip China currently has access to, and is more than capable of training top-performing AI systems. Prior to Trump’s decision, the Institute for Progress, a think tank focused on science and technology policy, estimated that the U.S. would produce 20 to 50 times more “compute power” than China by 2026 if it had kept full chip restrictions in place; unrestricted H200 exports could shrink that gap to almost nothing. “Compute power is the only reason we’ve retained our advantage so far,” Khan, who co-authored that report, told me. “And we’re about to just give it away.”

Thomas Wright: Trump wasted no time derailing his own AI plan

Perhaps this would have been justified if Trump had extracted a major concession from China. In fact, the president received nothing from Beijing in return for lifting the export controls. The one concession he did extract was from Nvidia itself: According to Trump, the company will give the U.S. government 25 percent of its revenue from sales to China. (It isn’t yet clear how exactly this will work or whether it is even legal.) Nvidia has said that Chinese companies will need approval from the Commerce Department in order to access H200s, but experts told me that that this measure won’t stop the chips from falling into the hands of the Chinese military or defense contractors; after all, the U.S. has no control over what happens to the chips once they’re in China.

You don’t have to believe that AI companies are creating godlike superintelligence to believe that this technology will be transformative. Already, AI systems are being used to produce self-driving cars, automate coding, develop autonomous weapons systems, allow for instant translation, speed up drug discovery, and enhance manufacturing productivity. The country that emerges as a leader in AI will gain a huge upper hand in many of the most important industries of the future, giving it much greater geopolitical and economic clout. “I think a world where China catches up to us on AI looks fundamentally different in five or 10 years,” Tim Fist, the director of emerging technology policy at the Institute for Progress, told me. “This is about who has the best military, who has soft power, who leads the world in economic growth and scientific progress. Those are the stakes.”

Even some of Trump’s Republican allies are alarmed by what he has done. Just days before the Trump administration’s announcement, a bipartisan group of senators, including Tom Cotton, introduced the SAFE Chips Act, a bill that would have prevented the Commerce Department from loosening chip-export restrictions for two and a half years. The move to lift restrictions on the H200 chips has been assailed by both progressive Democrats such as Senator Elizabeth Warren and MAGA Republicans such as Senators Josh Hawley and Lindsey Graham. But unless Congress actually passes a law, those criticisms will just be empty talk. Perhaps this is a test of whom congressional Republicans fear more: Beijing or Trump.