Trade tensions between China and the United States, particularly concerning the critical semiconductor industry, have recently intensified. The latest development saw China’s State Administration for Market Regulation issue a ruling on Monday, as reported by Bloomberg, stating that the prominent semiconductor manufacturer Nvidia had violated the country’s antitrust regulations. This ruling specifically pertained to Nvidia’s acquisition of Mellanox Technologies, a computer networking supplier, for $7 billion in 2020.

An Nvidia spokesperson addressed the matter by stating, “We comply with the law in all respects. We will continue to cooperate with all relevant government agencies as they evaluate the impact of export controls on competition in the commercial markets.” While China did not immediately announce any specific consequences tied to its findings, it indicated that its investigation into the matter would continue. This ruling is expected to cast a shadow over the ongoing tariff negotiations between the U.S. and China, which are currently taking place in Madrid.

Although these broader trade discussions may not solely focus on semiconductors, the critical issue of Chinese access to advanced Nvidia chips remains a significant point of contention between the two nations. The outgoing Biden administration previously introduced its AI Diffusion Rule in January, a measure designed to restrict U.S.-made AI chips from being exported to various countries, with specific and stricter limitations imposed on China and other perceived adversaries. However, the U.S. Department of Commerce formally repealed Biden’s AI rule in May, creating an element of uncertainty regarding the future of AI chip exports to China.

Despite the repeal, the situation has remained volatile. The Trump administration, in April, implemented its own set of licensing agreements for chips destined for China. A few months later, in July, companies were temporarily given clearance to resume selling these chips. Yet, just weeks after that, a new deal was struck, mandating that companies selling chips to China must provide the U.S. with a 15% cut of the revenue generated from those sales. In response to these escalating restrictions, China has actively discouraged its firms from purchasing Nvidia chips. According to a recent earnings call, none of Nvidia’s chips have successfully navigated the new, intricate export process, highlighting the significant hurdles in the bilateral semiconductor trade.