Nvidia Stock Falls as China Reportedly Restricts Imports of H200 Chips

Donald Trump's escalating conflict with Federal Reserve Chair Jerome Powell has entered a new phase with a criminal probe, a move that is generating significant backlash and could ultimately undermine the president's own economic agenda.

The controversial investigation may not only keep Powell at the Fed longer but also obstruct Trump's primary goal of securing lower interest rates.

Investigation May Strengthen Powell's Resolve

The administration's inquiry into Powell has been framed as an unprecedented challenge to the central bank's independence. While the official reason cited for the probe involves testimony about building renovations, Powell and other observers believe it is fundamentally about pressuring the Fed on monetary policy.

Instead of intimidating the Fed chair, this action may harden his resolve and that of his fellow central bankers, leading them to resist political influence more firmly.

Political Backlash Could Keep Powell in Power

The move has also triggered a political firestorm that could disrupt Trump's plans to replace Powell when his term expires in May. According to Bloomberg News correspondent Saleha Mohsin, the investigation risks derailing the administration's "reality television-style" process for selecting a new Fed chair.

A key obstacle has emerged in the Senate, where a group of Republican lawmakers led by Senator Thom Tillis has threatened to block the confirmation of any new Fed nominees until the probe is resolved. This political stalemate could have two potential outcomes:

• Powell could remain in his position as Fed Chair for an extended period.

• He might choose to stay on the Fed's board as a regular member to act as a safeguard against further political interference.

Economic Risks: Higher Borrowing Costs on the Horizon

The consequences of this pressure campaign extend far beyond Washington's political circles and could directly impact the U.S. economy.

Anna Wong, chief U.S. economist for Bloomberg Economics, notes that while recent inflation data might strengthen the economic case for lower interest rates, the growing perception that the Fed’s independence is under attack introduces a new risk.

Markets could begin demanding a higher risk premium for holding U.S. assets, pushing up long-term borrowing costs. This would be the direct opposite of the low-rate environment Trump has been pursuing.

Oil prices fell by more than 2% on Wednesday after comments from President Donald Trump suggested the United States might not pursue military action against Iran, easing geopolitical tensions that had supported the market.

U.S. crude oil dropped $1.81, or 2.96%, to settle at $59.34 per barrel. Brent, the global benchmark, declined by $1.84, or 2.81%, to close at $63.63 per barrel.

President Donald Trump's remarks from the White House sent ripples through global energy markets.

White House Comments Ease Geopolitical Fears

Speaking to reporters from the Oval Office, President Trump signaled a significant de-escalation. "We've been told that the killing in Iran is stopping. It's stopped. It's stopping and there's no plan for executions," he stated.

This marks a shift from the president's previous threats to take "very strong action" against the Islamic Republic if it were to execute protestors. The oil market interpreted his Wednesday remarks as a clear indication that immediate U.S. military strikes were less likely.

When asked directly if military action was off the table, Trump adopted a more cautious tone, saying the U.S. is monitoring the situation. "We're gonna watch it and see what the process is," the president said. "But we were given a very good statement by people who are aware of what's going on."

Market Focus Remains on Iranian Supply

The backdrop for these developments is the ongoing social unrest in Iran. Security forces have launched a crackdown on large-scale demonstrations, which have reportedly resulted in hundreds of deaths. The government has also cut off internet access, complicating efforts to verify the situation on the ground.

As a major OPEC member and a significant crude oil producer, Iran's internal stability is a key concern for energy traders. The market continues to watch closely for any signs that the social unrest could escalate and potentially disrupt the country's oil supplies.

The Trump administration has initiated a new strategy to secure the United States' access to critical mineral imports, following a months-long national security review of foreign supply chains.

At a White House ceremony on Wednesday, Staff Secretary Will Scharf explained the directive's purpose. "It sets up a mechanism, a process by which the United States will seek to secure its international supply chain of critical minerals," he stated.

However, both President Trump and Scharf left a key question unanswered: whether the new mechanism will include tariffs on materials like rare earth elements. The White House is expected to release further details on how the plan will be implemented.

A Direct Response to China's Dominance

This move comes after significant pressure on the administration to counter China, the world's largest processor of many critical minerals. Last year, during a trade dispute, Beijing demonstrated its leverage by constraining access to rare earths, which are essential for advanced technologies.

The decision stems from an investigation launched last April by the Commerce Department under Section 232 of the Trade Expansion Act. This authority examines whether imports threaten national security and is viewed as a potential avenue for the administration to impose new tariffs, especially if other global levies are struck down by the Supreme Court.

Will New Tariffs Destabilize the Trade Truce?

The introduction of additional duties could disrupt the fragile trade truce established last fall between President Trump and Chinese President Xi Jinping. That agreement involved lowering import taxes and easing export controls.

The policy may also have significant implications for uranium. As the U.S. looks to rapidly expand its nuclear power capacity to meet the enormous energy demands of artificial intelligence, a secure uranium supply is becoming increasingly vital.

The Challenge of Onshoring a Supply Chain

A major hurdle for the administration, should it impose tariffs, is the near-total lack of domestic production for most of these critical raw materials.

Traditionally, trade lawyers argue that tariffs are meant to shield an existing domestic industry from being overwhelmed by foreign suppliers. This allows local companies to grow and compete.

But in this case, the logic is complicated. China processes over 80% of the world's rare earths, and Kazakhstan is a primary source of uranium. With minimal domestic production, U.S. companies would still be forced to rely on foreign sources, making it unclear how they would benefit from new import taxes.

Source: Bloomberg

The United States will impose a 25% tariff on certain semiconductors transshipped through the country, a key component of a new agreement approved by President Donald Trump. The deal clears the way for Nvidia Corp. to export its Taiwan-made H200 artificial intelligence processors to China.

Under an order signed by Trump, the government will collect the duty on the chips as they are brought into the U.S. before being shipped to their final destinations in China and other foreign markets.

Nvidia relies on Taiwan Semiconductor Manufacturing Co. (TSMC) to produce its advanced chips, including the H200 model that was officially cleared for sale to China in December.

"It's not the highest level, but it's a very good level," Trump told reporters during the signing ceremony. "And China wants them, and other people want them, and we're going to be making 25% of the sale of those chips, basically."

How the New 25% Chip Tariff Works

The new directive applies a surcharge on chips that are specifically routed through the United States en route to other countries. According to White House staff secretary Will Scharf, the duty applies to chips "transshipped through the United States to other foreign countries" and not to those intended for domestic use.

This tariff was a condition set by Trump in exchange for greenlighting Nvidia's sales to the lucrative Chinese market.

While the order is a major step, Nvidia still requires formal export licenses from the Commerce Department's Bureau of Industry and Security (BIS) before shipments can begin. This licensing process can take weeks or even months. The move came just one day after the BIS eased its criteria for securing licenses to export H200 chips to China.

The full text of the presidential directive has not been released, leaving open the possibility that the tariff could apply to chips beyond Nvidia's H200. Although Trump did not mention Nvidia by name, he referenced its Blackwell and Rubin platforms, calling the product "a very good chip, and people want it, and we think it's in our best interest to do it."

A Major Win for Nvidia Amid Policy Reversal

This decision marks a significant victory for Nvidia, which has actively lobbied U.S. policymakers to relax export controls. These controls have previously blocked the company from selling its top-tier AI chips in China, the world's largest semiconductor market.

Nvidia CEO Jensen Huang has cultivated a close relationship with Trump, arguing that stringent U.S. restrictions ultimately benefit Chinese domestic competitors like Huawei Technologies Co.

The move represents a sharp turn from years of U.S. policy aimed at limiting Beijing's access to advanced American technology. It has drawn criticism from Democrats and national-security hawks who argue the deal will empower a strategic adversary in the race for AI dominance.

Broader Context and Future Chip Deals

Trump's approach to China has evolved from initiating a trade war with high tariffs to striking truces with President Xi Jinping. This new arrangement underscores his willingness to conduct business in sensitive sectors, provided the U.S. government secures a financial benefit.

He has also suggested that similar deals could be in the works for other major chipmakers, including Intel Corp. and Advanced Micro Devices Inc.

In a post on December 8, Trump stated, "This policy will support American Jobs, strengthen U.S. Manufacturing, and benefit American Taxpayers."

The policy shift coincides with broader trade discussions. Taiwanese products have generally been subject to a 20% tariff upon entering the U.S., though semiconductors were granted an exemption while the Commerce Department conducted a national security investigation into the sector. Meanwhile, top Taiwanese officials were in Washington to finalize a deal aimed at lowering the overall tariff rate to 15% and expanding TSMC's production facilities in the United States.

A high-stakes meeting between the United States, Denmark, and Greenland over the future of the Arctic island has ended with a "fundamental disagreement," prompting several European nations to dispatch military personnel to the region.

Foreign ministers from Denmark and Greenland met with US Vice President JD Vance and Secretary of State Marco Rubio in Washington. While both sides agreed to form a working group to discuss the path forward, the US has not backed down from its demands for control over the territory.

High-Stakes Washington Meeting Fails to Bridge Divide

The talks, described in Danish media as one of the most significant diplomatic moments for the Kingdom of Denmark since World War II, were an attempt to de-escalate the situation. Denmark and Greenland sought to persuade the US administration that a takeover of the semi-autonomous Arctic island was unnecessary.

However, Danish Foreign Minister Lars Lokke Rasmussen confirmed the core conflict remains unresolved. "Ideas that would not respect territorial integrity of the Kingdom of Denmark and the right of self-determination of the Greenland people are of course totally unacceptable," he told reporters. "We therefore still have a fundamental disagreement. We will, however, continue to talk."

When asked for comment, the Vice President's office referred to President Donald Trump's social media posts reiterating his demand for US control over Greenland for national security purposes. The White House redirected all questions back to the Vice President's office.

European Allies Deploy Military Personnel to the Arctic

In a sign of growing urgency, European allies are now stepping in. Germany is sending an "exploration mission" of 13 military personnel to Greenland's capital, Nuuk, from January 15 to 17. According to Germany's Defense Ministry, the goal is to "explore the framework conditions for possible military contributions to support Denmark in ensuring security in the region, for example, for maritime surveillance capabilities."

Sweden, Norway, and the UK have also announced plans to send military personnel. This follows reports that Germany intended to propose a joint NATO mission to monitor and protect security interests in the Arctic, highlighting a swift European response to the US threats.

In parallel, Denmark announced it would strengthen its own military presence in the far North with permanent military drills involving NATO allies.

Denmark Rejects US Demands, Cites 1951 Defense Pact

The Danish government argues that a US takeover of Greenland would be futile. A comprehensive defense agreement signed in 1951 already grants the United States the right to use the territory for its defense needs. Danish officials attempted to use this long-standing pact to convince the US administration, but the argument failed to gain traction.

Looking ahead, Rasmussen expressed a cautious hope for a diplomatic solution. "We agreed that it makes sense to try to sit down on a high level to explore whether there's possibilities to accommodate the concerns of the president while we at the same time respect the red lines of the Kingdom of Denmark," he said. "Whether that's doable—yeah, I hope and I would like to express that it could take down the temperature."