Following months of speculation, the administration has now confirmed tariffs targeting specific semiconductors. This measure applies to certain advanced chips, such as Nvidia's H200 AI processors destined for China.

On Wednesday, President Donald Trump issued a proclamation instituting a 25% duty on sophisticated AI semiconductors manufactured outside the United States that transit through the U.S. before being delivered to international clients. This action finalizes a major element of the Commerce Department's earlier approval, granted in December, permitting Nvidia to begin shipping its H200 AI chips to pre-screened customers in China. The tariff also encompasses chips from other firms, including AMD's MI325X.

Despite the additional cost, Nvidia publicly endorsed the decision, as it enables the company to sell the chip to authorized buyers. "We applaud President Trump's decision to allow America's chip industry to compete to support high-paying jobs and manufacturing in America. There is demand for these H200 semiconductors," the company stated. Reports indicate Nvidia was contemplating increasing production of these chips due to a surge of early orders from Chinese companies.

However, demand is only part of the equation. Another critical factor is how Chinese authorities choose to regulate these imports. China's position in the global semiconductor and AI competition mirrors that of the U.S. in some ways but differs in others. The nation aims to strengthen its domestic chip industry but is also wary of falling behind competitively while its local technology develops to match international peers.

According to reports from Nikkei Asia, the Chinese central government is in the process of drafting regulations that would define limits on how many semiconductors Chinese firms can acquire from abroad. Such a policy would permit some purchases of Nvidia's chips, marking a shift from the country's current restrictive stance on chip imports.

It is important to note that Wednesday's executive order does not affect chips imported into the U.S. for domestic use in research, defense, or commercial applications. The proclamation highlighted a key concern, stating, "The United States currently fully manufactures only approximately 10% of the chips it requires, making it heavily reliant on foreign supply chains. This dependence on foreign supply chains is a significant economic and national security risk."