The Trump administration has rescinded export restrictions on chip design software to China, marking a significant step toward implementing a comprehensive trade agreement reached during London negotiations in June. The move signals both countries’ commitment to reducing trade tensions while addressing critical supply chain dependencies that have strained bilateral relations.
Major Chip Companies Resume China Operations
All three leading chip design software companies—Synopsys, Cadence, and Siemens—confirmed they received notifications from the US Commerce Department that export curbs introduced in May had been lifted. These companies control approximately 70% of China’s Electronic Design Automation (EDA) software market, making their products essential for China’s semiconductor industry.
The restrictions, initially imposed in late May as retaliation for China’s rare earth export controls, had threatened to severely impact China’s ability to develop new microchips. EDA software is critical for semiconductor design, and experts warned that sustained restrictions could have devastating implications for China’s tech sector.
Cadence and Synopsys are currently working to restore access to their restricted software and tools in China, with Synopsys conducting assessments of the restrictions’ impact on its business operations and financials. Siemens has already restored full access to its software and technology, resuming sales and support to Chinese customers.
Broader Export Control Reversals Signal Diplomatic Progress
The chip software decision represents part of a wider rollback of US export restrictions. The Trump administration also sent letters to American ethane producers to rescind export controls that had halted shipments of the chemical to China. Ethane, primarily used for plastics production, saw nearly 50% of US exports directed to China last year, according to US Energy Information Administration data.
Reuters reported that the Commerce Department has instructed GE Aerospace and other companies to restart jet engine shipments to China, though neither GE nor the Commerce Department have confirmed these reports. These moves collectively demonstrate the scope of the London agreement’s implementation.
The export control reversals follow a carefully orchestrated diplomatic process. After a 90-day trade truce announced in Geneva in May, tensions flared when China maintained its rare earth licensing requirements despite the temporary agreement. This prompted the US to impose countermeasures on chip software, ethane, and jet engines, reigniting trade hostilities.
Rare Earth Dynamics Drive Trade Negotiations
China’s dominance in rare earth processing—controlling 90% of global capacity—gave Beijing significant leverage during negotiations. In April, China imposed new licensing requirements on seven types of rare earth minerals and several magnets, materials essential for electronics, vehicles, and military equipment including fighter jets.
These restrictions directly challenged US supply chains and prompted Washington’s retaliatory measures. The London talks in June successfully addressed this impasse, with China agreeing to allow and accelerate rare earth flows under existing licensing regimes while the US committed to lifting related countermeasures.
China’s Commerce Ministry confirmed both countries are actively implementing the London agreement, stating that Beijing is “reviewing compliant export license applications for controlled items.” The ministry emphasized that “dialogue and cooperation are the proper way forward, while coercion and extortion lead nowhere.”
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Tariff Challenges Remain Despite Progress
While the latest agreement marks diplomatic progress, significant trade barriers persist. US tariffs on Chinese goods remain at approximately 55%, according to Trump’s statements, including a 10% “reciprocal” tariff imposed on trade partners in April, 20% duties related to fentanyl concerns, and pre-existing tariffs.
Trump indicated that China’s tariffs on US goods would be set at 10%, though the precise scope of this figure remains unclear. The arrangement appears to address immediate supply chain concerns rather than the broader tariff structure that has characterized US-China trade relations.
The current trade truce expires in August, creating urgency for both sides to establish more permanent arrangements. The London framework demonstrates that targeted negotiations can resolve specific disputes, but the underlying trade war dynamics that began during Trump’s first term continue to influence bilateral relations.
The chip software restrictions’ reversal reflects the interconnected nature of modern supply chains and the costs of technological decoupling. As both economies work to implement the London agreement, the coming months will test whether this diplomatic progress can extend beyond immediate tactical concerns to address the structural issues driving US-China trade tensions.
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