China to End Retaliation Against US Manufacturers in Major De-escalation of Tech Cold War
A significant Semiconductor Truce has been reached in the fraught technological rivalry between the world’s two largest economies, with China agreeing to end retaliation against US semiconductor manufacturers.
This decisive commitment is a centerpiece of the broader trade and economic agreement, aiming to dismantle politically motivated legal and regulatory barriers that have ensnared American tech firms operating within the Chinese market.
The move provides a critical injection of certainty into the highly sensitive global chip supply chain, representing a tangible de-escalation of the Tech Cold War and a crucial win for corporate stability.
The understanding, finalized during recent high-level talks, sees Beijing commit to immediate and tangible actions, including the termination of various long-running investigations and the normalization of trade operations for specific entities.
This diplomatic victory is reciprocated by Washington’s temporary suspension of certain measures that would have significantly expanded export controls, thereby establishing a year-long cooling-off period for the technology sector.
Headline Commitments on US Tech
• Termination of Investigations: China will immediately terminate existing antitrust, anti-monopoly, and anti-dumping investigations that have been targeting U.S. semiconductor companies.
• Resumption of Trade: Beijing commits to ensuring the immediate resumption of normal trade from facilities in China, specifically citing the need to allow the flow of essential legacy chips to global markets.
• Removal of Retaliatory Measures: All non-tariff countermeasures taken against U.S. firms since March 2025, including the placement of American companies on “unreliable entity” lists, will be suspended or removed.
• Reciprocal Pause by US: In return, the U.S. will suspend for one year the implementation of the expansive “50 percent rule” on technology export controls.
Clearing the Regulatory Landscape
For the past several years, U.S. semiconductor companies operating in China have faced a challenging and unpredictable regulatory environment.
The use of investigations—including those related to anti-trust and anti-monopoly laws—has been widely perceived in the West as a form of non-tariff retaliation, aimed at pressuring or penalizing American firms caught in the geopolitical crossfire.
These investigations often led to long periods of uncertainty, hindering investment decisions and commercial operations, effectively using China’s vast domestic market as a negotiating tool.
China’s commitment to terminate these various investigations offers immediate clarity and legal security to manufacturers.
By clearing this backlog of regulatory scrutiny, Beijing signals a desire to separate essential commercial operations from the most volatile aspects of the bilateral trade war, allowing US companies to operate with a greater, though temporary, degree of predictability.
The stability this offers is immense. The semiconductor industry is capital-intensive and relies on long-term planning.
The removal of these politically charged legal threats is expected to encourage reinvestment and stabilise production across the entire supply chain, from equipment manufacturers to chip designers and foundries.
Restoring the Flow of Legacy Chips
A critical, yet often overlooked, component of the agreement is China’s pledge to ensure the resumption of trade from facilities like the one operated by Nexperia in China.
While high-end, advanced chips used for Artificial Intelligence and high-performance computing remain under strict U.S. export control, legacy chips—the workhorse components used in cars, consumer electronics, and essential machinery—are just as critical to the global economy.
These chips are predominantly produced in large volumes by facilities in Asia, and interruptions to their supply can have cascading effects across various industries.
By explicitly addressing the resumption of production and export for these essential components, the agreement ensures that the vast, complex, and highly integrated lower-end of the chip supply chain is stabilized.
This move directly benefits global manufacturers, particularly in Europe and the U.S., who rely on these commonly used chips to maintain their production lines, easing immediate inflationary pressures caused by parts scarcity.
Washington’s Reciprocal Concession
The truce on semiconductors is a balanced exchange, with the U.S. offering a significant reciprocal concession by agreeing to suspend the implementation of the interim final rule known as the “50 percent rule” for one year.
This rule, which was set to significantly expand the U.S. technology blacklist, would have prohibited U.S. companies from selling certain technology—including chip manufacturing equipment—to any firm more than 50 per cent owned by an entity already on a restricted list.
Analysts had projected that this expansion could have added thousands of Chinese subsidiaries and affiliates to the export control list, creating a massive compliance burden and drastically increasing the fragmentation of the global technology ecosystem.
By suspending this rule, Washington provides Beijing with a major strategic win, easing the pressure on its domestic industry and supply chains.
This de-escalation suggests a shift in US strategy: instead of accelerating the technological decoupling, both sides are acknowledging the deep economic pain caused by unchecked regulatory escalation and have agreed to a temporary ceasefire.
A Fragile Peace
While the agreement provides a welcome respite for global markets, experts warn that the peace is fragile. The core, structural issues that underpin the Sino-American tech rivalry—U.S. concerns over national security and Chinese demands for technological self-sufficiency—remain unresolved.
The one-year duration of the suspension for both the Chinese retaliatory measures and the U.S. “50 percent rule” indicates that this is a temporary truce, not a permanent resolution.
The coming year will be defined by whether this pause allows both nations to find a sustainable path forward that separates economic interdependence from national security competition, or whether it merely delays the inevitable resumption of the Tech Cold War after the one-year window closes.
The stability of the semiconductor truce rests entirely on mutual commitment and continued dialogue.
