The US government is levying a 25% charge on NVIDIA's AI chip exports to China by framing it as a "fee for service" for a mandatory security review. This creative legal interpretation bypasses the constitutional prohibition on export tariffs.
The rule limits H200 shipments to China to 50% of the quantity already sold for use within the US. This creates a moving target, not a fixed quota, directly linking China's access to the growth of the American domestic market for these chips.
Chinese commentators speculate the required third-party review of US AI chips is a ploy by agencies like the NSA to insert malware. This deep-seated mistrust could deter China from purchasing the chips, regardless of performance benefits or US policy.
The new strategy directs the CDAO to act as a "wartime CDAO" to eliminate blockers like lengthy authorization processes. A monthly "barrier removal board" is being established with the authority to waive non-statutory requirements, mirroring the rapid risk assessment seen in actual combat.
The Pentagon's new AI strategy explicitly states that military exercises and experiments failing to adequately integrate AI will be targeted for budget cuts. This threat of financial penalty creates a powerful, top-down incentive for reluctant bureaucratic elements to adopt new technologies.
An Alibaba tech lead claims the US compute advantage allows for wasteful but effective "rich people innovation" (running many experiments). In contrast, Chinese firms are forced into "poor people innovation," bogged down by operational needs and unable to risk compute on next-gen research.
Beijing's decision to block Nvidia H200 imports exposes a conflict between its cloud giants (Alibaba, Tencent) who need the chips and state-backed champions (Huawei) who benefit from a protected, captive market for their own less-advanced hardware.
The strategy's focus on AI simulation acknowledges a key risk: AI systems can develop winning tactics by exploiting unrealistic aspects of a simulation. If simulation physics or capabilities don't perfectly match reality, these AI-derived strategies could fail catastrophically when deployed.
The Pentagon's Chief Digital and AI Officer (CDAO) is now authorized to demand data from any department component. Denials must be justified to the Undersecretary of War within seven days, effectively breaking down long-standing data silos by creating a high-level, rapid escalation path.