Adelaide President Donald Trump of the United States authorized the shipment of Nvidia’s potent H200 artificial intelligence processors to China this week.
AI Chips Fuel Warfare
In exchange, the US government will get 25% of the sales revenue—a practice that has come to be associated with this administration—of a private company’s earnings.
Nvidia’s second-most potent AI processor is the H200. It is almost six times more powerful than the H20 chips that Chinese consumers could previously purchase.
These are not consumer electronics that run the newest kitten meme generator or assist you with the weekly pub quiz. They are the computing powerhouses of sophisticated AI systems that increasingly power self-governing armaments. This covers targeting algorithms in contemporary combat, automated gun placement, and drone navigation systems.
AI Exports Reshape Geopolitics
Consider the very real AI-powered targeting systems that are now in use, such as in Gaza and Ukraine, rather than the future setting of the Terminator films.
The decision to let these delicate shipments is astounding at the conclusion of a year that has seen the US and China embroiled in a fierce trade battle in which Trump at one time raised tariffs on China to 145%.
This shift of policy poses a fundamental challenge to the operation of export restrictions. For US allies like Australia, who are torn between growing defense ties with an increasingly erratic US and economic reliance on China, it also poses critical challenges.
How we arrived
In the worldwide battle for sophisticated artificial intelligence, having access to cutting-edge semiconductor chips is essential. The Biden administration implemented stringent export regulations for semiconductors in October 2022. Advanced AI chips and chip-making machinery headed for China were the focus of these regulations.
This strategy was known as “little yard, high fence.” The objective was to limit a small number of critical technology while permitting more extensive commerce with China.
The Biden administration blacklisted 140 Chinese companies for export. Additionally, it prohibited US engineers from aiding cutting-edge Chinese chip factories and limited 24 different kinds of production equipment.
These actions had a significant effect. Chinese AI businesses had to develop using outdated technology between 2022 and 2024 due to their inability to get the necessary processing power.
An alternative approach
Trump’s strategy is essentially different. His government gave Nvidia permission to export H20 chips to China in July in return for 15% of sales. Many saw this as a surrender to China in connection with discussions on US access to rare earth materials.
Trump’s recent decision to authorize the transfer of the far more potent H200 chips to China is indicative of his disregard for trade regulations.
Transactional “deals” where everything has a cost are replacing strategic security choices.
AI warfare has already begun
On battlefields throughout the globe, AI processors now control targeting systems, direct weapons, and make snap choices.
According to reports, the employment of AI-equipped drones by Ukrainian military improves attack accuracy from 30–50% to almost 80%. These drones can autonomously navigate the final approach to targets even in highly congested areas.
A Guardian story claims that Israel’s “Lavender” AI system found 37,000 possible targets connected to Hamas, speeding up attacks but allegedly causing a large number of civilian deaths.
According to reports, the People’s Liberation Army of China is using AI for autonomous target detection, drone swarm coordination, and real-time combat decision-making.
Project Maven, a Pentagon initiative, combines sensor and satellite data to identify potential targets for US military action.
This is the reality of the battlefield today, not science fiction.
A novel kind of washing
These days, semiconductors are “dual-use” devices. Cruise missiles can be guided by the same chips that teach AI chatbots. Attack drones are navigable by the same microcontrollers that operate washing machines.
According to British experts, a significant portion of the foreign parts used in Russian drones in Ukraine originated in the US and Europe.
Some were really taken from home appliances. According to reports, Russian procurement networks purchased washing machine repair chips, used acetone to remove the manufacturer’s identity, and then put them into kamikaze drones.
Before arriving to Russian producers, many parts passed via third-party nations like Kazakhstan and India.
Washing machine bans would be disastrous for consumer economies. However, the microcontrollers found in washing machines are ideal for military drones. Export limitations may turn into a complex game of whack-a-mole, with new workarounds emerging for every restriction.
Australia’s predicament
Australia has reorganized its export control system to better match with US interests as a result of joining the AUKUS security alliance.
However, Australia finds itself in a difficult situation. Approximately 30% of Australia’s overall goods commerce is with China. In the meanwhile, in order to get access to its defense technologies, the US is increasingly demanding policy congruence.
What does Australia stand to gain from the US easing export restrictions on cutting-edge AI chips? Do we have to follow? Australia’s alignment with AUKUS was based on partners having comparable perspectives on risks and responding consistently.
But according to the US’s newly published National Security Strategy, migration to Europe poses a greater “civilizational” danger than Russia’s military might. Australians obviously have a completely different perspective on this.
When security turns becomes a negotiating tool
When export restrictions are reliable, consistent, and directly related to national security, they are effective. When they turn into negotiating tools or sources of income, they fall short.
The “high barrier” around vital technology becomes a turnstile for the proper price according to Trump’s H200 contract.
Australia has important questions. Do export restrictions aligned with the United States benefit Australia? Or are we delegating sovereignty to a partner whose choices are becoming more transactional and arbitrary? RD RD
