The United States is currently operating a dual-track policy toward high-end semiconductor exports to China that appears contradictory on its face. While the Commerce Department continues to issue licenses for the sale of Nvidia H200 chips to specific Chinese firms, Congress is simultaneously advancing the AI OVERWATCH Act, a legislative mechanism designed to grant lawmakers the power to block those very exports. This friction between executive-branch approvals and legislative-branch oversight suggests that the current regulatory posture is less about facilitating commerce and more about maintaining a complex system of political signaling and negotiation leverage.
The reality of these transactions is far more constrained than the volume of interest would suggest. During a July 14, 2026, hearing before the House Foreign Affairs Committee, Jeffrey Kessler, the Under Secretary of Commerce for Industry and Security, provided a blunt assessment of the actual trade occurring under these licenses.
“The bottom line is very few shipments against licenses for H200s and equivalents have taken place. It’s a very small quantity of chips.”
This testimony highlights a significant gap between the high-level policy authorizations and the actual movement of hardware, indicating that the licensing process serves as a controlled valve rather than an open market.
This regulatory framework was established in January 2026, when the Trump administration reversed the Biden-era policy that had fully prohibited the export of H100, H200, and Blackwell GPUs to China. The new policy authorized H200 exports under strict conditions: a 50% volume cap relative to US sales, a 25% fee on the dollar value of sales paid to the US government, a requirement for third-party technical reviews, and a prohibition on military end-use. President Trump defended the arrangement, stating,
“We’re allowing them to do it, but the United States is getting 25% of the chips, in terms of the dollar value.”
He further noted,
“It’s not the highest level, but it’s a pretty good level, and China wants them and other people want them and we’re going to be making 25% on the sale of those chips, basically.”
The scale of demand remains immense, creating a persistent pressure on the system. Following the January 2026 authorization, Chinese companies placed orders for more than 2 million H200 chips at roughly $27,000 each, totaling over $50 billion, according to data reported by Reuters — a figure that far outstrips supply, as Nvidia’s total inventory was approximately 700,000 units. Despite this demand, recent approvals have been highly targeted. As reported in a Reuters exclusive on July 14, ZTE Kangxun Telecom and server maker Maginfra were cleared for Nvidia H200 chips, while a Kingsoft subsidiary, Zhuhai Hengqin, received approval for AMD chips that compete with the H200. Meanwhile, more advanced Blackwell chips, including the B100, B200, and GB200, remain fully restricted, with a downgraded B30A variant still under government review.
The AI OVERWATCH Act, included in the Senate Armed Services Committee’s manager’s amendment for the FY2027 National Defense Authorization Act, seeks to formalize congressional control over this process. The bill, which passed the House Foreign Affairs Committee 42-2 in January, would grant Congress 30 days to pass a joint resolution blocking specific export licenses. The SASC voted 18-9 to advance the broader $1.2 trillion NDAA package, which also includes the Chip Security Act to track AI chip smuggling and the MATCH Act to control semiconductor manufacturing equipment exports. Democrats on the House Foreign Affairs Committee have characterized the current H200 approvals as
“a gift to Beijing,”
reflecting the partisan divide over the administration’s conditional approach.
The administration and industry leaders have pushed back against these legislative constraints. Nvidia CEO Jensen Huang has publicly opposed the AI OVERWATCH Act, arguing it would harm the competitiveness of US firms. White House AI czar David Sacks has argued the bill would
“take away President Trump’s authorities”
and handicap his
“America First strategy.”
This opposition underscores the administration’s desire to retain the flexibility to use export licenses as a tool for diplomatic and economic maneuvering.
The intensity of this regulatory focus is informed by a history of illicit activity. In December 2025, the Department of Justice dismantled a $160 million China-linked smuggling network known as Operation Gatekeeper. The operation, which spanned from October 2024 to May 2025, involved shell companies, falsified paperwork, and fake labels to move H100 and H200 chips into China. Over $50 million in chips and cash were seized.
The machinery of conditional licenses, minimal shipments, and congressional blocking authority reveals a policy designed for negotiation rather than free trade. By maintaining a system where approvals are granted in small, highly regulated quantities while simultaneously threatening legislative shutdowns, the US government is keeping the terms of engagement under constant, active management — a posture where the appearance of commerce may matter more than the commerce itself.