U.S.-China tariff delay, chip sales deal, and South China Sea tensions

Washington and Beijing extend tariff deadline, Trump allows Nvidia and AMD to sell chips under a revenue-sharing model, and a Chinese navy ship collides with its own coast guard near Scarborough Shoal

Welcome back to What’s Happening in China, your weekly China brief.

Washington and Beijing agreed this week to delay by another 90 days reciprocal higher tariffs, extending the deadline to November 10.

Despite concerns that it might accelerate Beijing’s technological capabilities—and in a questionable arrangement (wasn’t the goal to protect national security?)—Trump has agreed to let Nvidia and AMD sell some chips to China, provided the two companies pay 15% of their revenues to the U.S. government, a model U.S. Treasury Secretary Scott Bessent said could be used in other industries.

On the PRC side, even as it pushes for a relaxation in high-bandwidth memory chip export controls, news emerged that it isn’t too happy with companies relying on American chips. According to Reuters, “Chinese officials asked companies why they needed to buy Nvidia chips when they could purchase from domestic suppliers.” Adding to Beijing’s security concerns, reports indicate that U.S. authorities are using location-tracking devices in some shipments of chips deemed at risk of illegal diversion to China.

With a few bumps along the way, it seems the two sides may still manage a fragile equilibrium in the relationship ahead of a potential Trump-Xi meeting in the fall.

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Meanwhile, as PRC-Philippines territorial tensions persist in the South China Sea, on Monday a Chinese PLA navy ship collided with a vessel from its own coast guard near the contested Scarborough Shoal, as the two were chasing a Philippine Coast Guard patrol boat.

Commenting on the incident, the Chinese Ministry of National Defense deflected any responsiblity, saying that “the Philippine coast guard vessels frequently engaged in dangerous maneuvers, including high-speed ramming and sharp turns to cross the bows of Chinese vessels,” and urged “the Philippines to immediately cease its infringing and provocative words and actions” while reserving China “the right to take necessary countermeasures to resolutely defend its territorial sovereignty and maritime rights and interests.”

While no casualties have been officially reported, it’s just a matter of time before the PRC’s aggressiveness in the South China Sea triggers a more dramatic incident and a serious diplomatic crisis with global repercussions.

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Before we dive in, I will be taking a short break over the next couple of weeks and will return to your inbox on September 6.

Wishing you a wonderful end to the summer.

— PC

Correction (August 17, 2025): The link to the Chinese Ministry of National Defense response has been corrected.

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Through the Lens

Graffiti in a Beijing hutong.