The artificial-intelligence  (AI) chips Nvidia is authorized to export to China will undergo an unusual security review in the United States before shipment, according to Trump administration officials cited by the Wall Street Journal on Tuesday. The unorthodox measure highlights national-security pressure on the administration following its controversial decision to allow the sales.

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The arrangement involves a complex supply-chain journey where H200 chips manufactured primarily in Taiwan will travel to the U.S. for security review before being sent to China. Trump announced Monday his approval for Nvidia to export H200 chips to China in exchange for a 25% surcharge, saying he informed Chinese President Xi Jinping of the move and received a positive response.

Nvidia shares rose more than 2% in after-hours trading onMonday following Trump's announcement. The company praised the decision as striking "a thoughtful balance that is great for America" and supporting high-paying American jobs.

The policy shift has sparked backlash from China hardliners and Democratic lawmakers. Senator Elizabeth Warren warned the move "risks turbocharging China's bid for technological and military dominance," while Senator Ron Wyden accused Trump of getting "taken to the cleaners by China yet again."

Unusual Supply Chain Setup Raises Questions

The chips would mainly be manufactured in Taiwan before traveling to the U.S. for national-security review, then shipped to China, people familiar with the matter told the Journal. Experts said this complex journey highlights the unprecedented nature of the agreement.

The unusual setup may stem partly from legal obstacles around the 25% fee structure. The Constitution forbids export taxes, so routing chips through the U.S. allows the government to classify the fee as an import tax or tariff rather than an export tax, according to experts. A U.S. Commerce Department official said the 25% payment will be collected as a tariff when chips are shipped from Taiwan to the U.S. for inspection by the Bureau of Industry and Security.

The arrangement also underscores U.S. dependence on Taiwan and other countries for tech products, the Journal noted. Officials did not provide specifics on how the security review process would work or what it would entail.

National Security Concerns Mount

Several lawmakers raised concerns that the chips could ultimately benefit the Chinese military. "When China starts supplying their military with AI built on U.S. chips, the world will regret this decision," said Brad Carson, a former Under Secretary of the Army, according to Reuters.

Stewart Baker, a former Homeland Security and National Security Agency official, called the notion that the U.S. can keep China dependent on American chips by allowing H200 sales "a delusion." He said Beijing will continue pressing to develop a domestic industry aimed at "the bankruptcy of Nvidia and the dependence of the United States on Chinese AI."

Representative Raja Krishnamoorthi described the move as a "profound national security mistake and a gift to our top strategic competitor."

Nvidia CEO Jensen Huang dismissed military concerns, saying Beijing's forces would not use U.S. chips due to its own security concerns. Trump emphasized only approved buyers vetted by the Commerce Department would receive chips.

Competing Strategic Views

The Trump administration argues that selling advanced chips to China discourages Chinese competitors like Huawei from catching up with Nvidia's designs. White House AI czar David Sacks said in January that if Huawei's AI chips become dominant in five years, "that means we lost."

Chris McGuire, who worked on export controls in the Biden administration and is now a senior fellow at the Council on Foreign Relations, criticized this approach. "The interests here are not really those of the country, they are those of Nvidia," McGuire said.

However, some China hawks see more limited impact. James Mulvenon, a Chinese military expert, said Beijing has made clear its long-term strategic goal is not to depend on Western technology, so "these gains will likely be transitory."

Market Access Remains Uncertain

The H200 represents a substantial capability upgrade, with total processing performance nearly 10 times the limit previously allowed for export to China, according to Georgetown University's Center for Security and Emerging Technology. It is estimated to be twice as powerful as the H20 chip currently exportable to China.

However, market access remains uncertain. Beijing authorities previously instructed domestic customers to rely on Chinese processors like Huawei's instead of American products, effectively blocking earlier H20 exports.

After meeting with Trump last week, Huang expressed uncertainty about Chinese acceptance of H200 chips, telling reporters, "We don't know. We have no clue." Huang stated China represented a $50 billion market for Nvidia, though the company disclosed H20 sales in China totaled just $50 million during its third fiscal quarter.

The same day Trump announced the agreement, the Justice Department charged two businessmen for trafficking export-controlled Nvidia chips, including the H200, to China. Nvidia has said there is no large-scale smuggling of its chips.