Biden’s AI Chip Export Regulation Rescinded
But the Alternative for Some Nations Could be Much Worse
May 9th, 2025 - On Wednesday, May 8th, Bloomberg and Reuters reported that the Trump administration would rescind and replace the Biden AI export regulation (Framework for Diffusion of AI). And as of today, the process to rescind the Biden regulation was formally initiated - the rescission was based on the Commerce Department’s statement that the regulation was “overly complex, overly bureaucratic” and unenforceable.
However, a replacement regulation has not been announced even though the Trump administration has pledged to create "a much simpler rule that unleashes American innovation and ensures American AI dominance." Trump officials are actively working toward this new rule that would strengthen the control of chips abroad, according to Aiolian's sources. The U.S. government’s recent ban on Nvidia’s shipments of their H20 chip to China shows that controlling China’s access to U.S. AI technology is still a priority despite Jensen Huang’s claim that “China is not behind” [on AI chip technology] and that such a ban would have the opposite effect and encourage adoption of Chinese AI technology.
Per the same philosophy as Liberation Day, Trump and his administration favor a transactional approach where they can negotiate with each country separately. Bloomberg’s sources state that the rescission of the Biden regulation provides a fresh opportunity for other countries to negotiate their own chip access via bilateral country-to-country agreements… and that those deals could be influenced by investment promises or broader trade and diplomatic considerations.
Our expectation is that the new, work-in-progress Trump regulation will meet their goal of being both simpler and stronger. But it's likely that the new regulation will be the penalty/purgatory for countries that can’t negotiate a customized bilateral agreement with the U.S. And it seems very likely both the Kingdom of Saudi Arabia and UAE have accomplished such agreements (per DGA's report) and those will be announced during Trump’s visit to the region in mid-May. In both cases, the countries will likely pledge even larger technology investments in the U.S. and possibly agree to restricting their cooperation with China.
With those as negotiating levers, other countries will face large challenges as they lack the ability to commit trillions in funding for the U.S. and most developing nations have a national strategy to remain neutral between the US and China. The Biden regulation avoided this country-level “China expulsion” by applying it at the company-level (the NVEU framework). It remains to be seen how the Trump administration will handle this in the per-country bilateral agreements and their new regulation. The first indicator will be details of the KSA and UAE bilateral agreements. In any scenario, combining tariff negotiations with national security concerns - in each country-to-country negotiation - will make for an incredibly messy next couple of months.
Our mission at Aiolian International is to help developing nations and their local companies create sovereign AI infrastructure while navigating the evolving US regulations for AI technology exports. Please don’t hesitate to contact us if you have questions.