Trade War Monitor, July 21: Nvidia to Resume Shipping AI chips to China as Trade Tensions Ease

China's economic growth decelerated in the second quarter of 2025, with GDP expanding by 5.2% year-on-year. This slowdown was attributed primarily to waning domestic consumption and a sharp downturn in property investment, which fell at its fastest pace since early 2020. The growth figure matched the average forecast in Caixin’s economist survey but fell short of the stronger 5.4% recorded in the previous quarter, resulting in a 5.3% growth rate for the first half of the year. Officials from the National Bureau of Statistics acknowledged that China's economic recovery foundation remains fragile due to insufficient domestic demand and ongoing external uncertainties, indicating the need for further consolidation of recovery efforts. [para. 1][para. 5][para. 6][para. 7]

Despite the overall economic slowdown, China saw robust growth in its "new three" exports—lithium batteries, solar cells, and new energy vehicles (NEVs)—in June 2025. Lithium-ion battery exports surged nearly 30% year-on-year to $6.6 billion, with the shipment volume growing by 18%. Solar cell shipments increased by over 45% in volume compared to the previous year; however, the value of these exports actually declined by nearly 25%. Passenger NEV export volume almost doubled year-on-year, but with a smaller value growth of 71%, showing a divergence between volume expansion and export revenue. Moreover, China has enacted fresh export controls on core lithium battery technologies—an initiative to protect its dominance in the global electric vehicle supply chain. The new restrictions, introduced by the Ministry of Commerce and Ministry of Science and Technology, aim to secure key intellectual property involved in next-generation battery materials and lithium extraction, as many countries strive to develop independent EV industries. [para. 2][para. 9][para. 10][para. 11][para. 18][para. 19][para. 20]

In international trade and industry developments, U.S.-China economic relations witnessed a slight thaw as Nvidia CEO Jensen Huang visited Beijing for the China International Supply Chain Expo. He indicated that the U.S. government would shortly permit Nvidia to resume shipments of H20 AI chips to China, pending license processing, reflecting an easing of certain tech export bans. Huang also lauded China’s AI innovation, particularly open-source models by DeepSeek and Alibaba, which continue to drive demand for Nvidia’s products. [para. 3][para. 14][para. 15][para. 16]

On the automotive front, Brazil imported a record 134,582 Chinese-made vehicles in the first half of 2025—a 3.6% increase year-on-year. Chinese cars now constitute 62.1% of all vehicles imported by Brazil, tripling the number imported from Argentina (previously the top supplier), and well ahead of imports from Mexico. [para. 21][para. 22][para. 23]

China's consumption challenge remains prominent, with Commerce Minister Wang Wentao noting that despite China’s position as the world’s second-largest consumer market, insufficient domestic demand persists. Retail sales rose from 39.1 trillion yuan ($5.4 trillion) in 2020 to 48.3 trillion yuan in 2024, an average annual growth of 5.5%. In nominal terms, China's retail market is 80% the size of that of the U.S., but adjusted for purchasing power, it is reportedly 1.6 times larger. China has led the world in online retail and dominates in key consumer goods sectors. [para. 29][para. 30][para. 31][para. 32]

Amid escalating U.S.-China rivalry, global economic instability grows, with smaller developing nations feeling the impact. While the dollar remains a dominant reserve currency, technological advances such as blockchain and AI may drive alternative payment and settlement systems, possibly increasing gold's significance as a store of value in central bank reserves. [para. 25][para. 26][para. 27][para. 28]