US–China Trade & Tech War

New reports indicate the US has at most 6–12 months before China gains or develops advanced AI models — like Anthropic's Claude Mythos and OpenAI's GPT-5.5-Cyber — able to find vulnerabilities and launch cyberattacks. Trump signed an executive order encouraging voluntary government review of powerful AI models at least 30 days before release, and Congress unveiled a 269-page draft bill with AI safety rules and a three-year ban on state AI laws. Concerns cited include Chinese theft via distillation attacks, deepening China–Russia AI cooperation, DeepSeek raising billions to compete, and China integrating AI into its five-year plan.

After the Supreme Court struck down the IEEPA tariffs, the USTR proposed tariffs of 10% and 12.5% on imports from 60 economies — including the UK, EU, Canada, China, India and Japan — citing their failure to ban goods made with forced labor, with hearings set for 7 July. A model suggested the Section 301 regime could raise up to $169 billion a year, matching IEEPA revenue. The EU condemned its own 10% tariff as unjustified, noting its forced-labor regulation (effective December 2027) is the world's most stringent, and warned the move endangers the Turnberry trade truce.

Huawei announced a new chip-design principle, the 'Tau Scaling Law', aiming to produce semiconductors equivalent to 1.4-nanometre processes by 2031. Rather than shrinking transistors — which requires the advanced lithography tools US controls deny China — the approach cuts signal latency and improves data movement to reach advanced performance another way. The announcement underscores Beijing's drive for semiconductor self-sufficiency and its implications for AI computing and geopolitical leverage.

China's commerce ministry announced a preliminary agreement to cut reciprocal tariffs on goods worth at least $30 billion on each side, establish trade and investment councils, and finalize agricultural and aircraft deals, following Trump's state visit to Beijing. China agreed to restore registrations for some US beef exporters and to purchase 200 Boeing aircraft. The statement on rare earths went no further than both sides agreeing to study each other's concerns; analysts called the cuts positive but too small to move GDP forecasts.

The Commerce Department approved around 10 Chinese companies — including Alibaba, Tencent, ByteDance and JD.com — to buy Nvidia's H200 AI chips, with Trump negotiating a 25% revenue share from the sales and Nvidia CEO Jensen Huang joining a White House delegation to China. No deliveries occurred: Beijing blocked or tightly vetted orders to protect domestic chip development, pushing Chinese firms toward Huawei parts. Washington required buyers to demonstrate security procedures and non-military use.

Chinese AI firm DeepSeek released version 4 of its model, designed to run on Huawei's GPU chips, demonstrating China's drive for technological autonomy from US silicon. The launch threatens the market position of OpenAI and Anthropic, both planning IPOs in late 2026. OpenAI and Anthropic have accused DeepSeek of using 'distillation' to train its models on responses from ChatGPT and Claude.

Commentary on the February Supreme Court decision framed the strike-down of the 'Liberation Day' IEEPA tariffs as a major check on executive power, but noted Trump had already begun reimposing many of the same tariffs under other legal authorities. Analysts argued only Congress, by overhauling outdated tariff laws and reclaiming its constitutional trade role, could resolve the underlying crisis. The ruling thus slowed but did not stop the tariff wall.

The administration publicly downplayed export controls, approving higher-tier chip exports to China and suspending further restrictions to keep trade talks stable. The move relieved Nvidia and AMD, whose China revenue the controls had stranded. It exposed the core contradiction of wanting both a trade deal and a tech blockade — and here choosing the deal.

Congress approved the Chip Security Act on 26 March 2026, mandating that tracking technology be embedded directly into AI chips to counter smuggling. The law moves enforcement from the customs line to the silicon itself, letting a chip be located after sale. It attacks the smuggling that had blunted export controls rather than merely gating exports at the border.

The Commerce Department revised the rules governing exports of Nvidia's H200 and AMD's MI325X AI chips to China, moving from a presumption of denial to case-by-case licensing. Naming those two chips explicitly set the template for the later H200-to-China clearances. The shift, flowing from the Busan commitment to forgo new controls, traded hard tech leverage for trade-talk stability.

Trade talks in Geneva produced a 90-day pause that cut US tariffs on Chinese goods from 145% to 30% and Chinese tariffs on US goods from 125% to 10%. China conceding only to 10% against the US 30% left the embargo's structural fight intact. It was de-escalation by exhaustion, not a settlement.