US Rescinds Biden's 'AI Diffusion Rule' on AI Chips

The U.S. Department of Commerce formally rescinded Joe Biden's 'AI Diffusion Rule' on Tuesday, just two days before the regulation was set to take effect. The move ends, at least for now, Washington's attempt to control who can buy AI chips made on American soil.

The news comes after a week or so of rumors about the regulation's fate, according to TechCrunch. The Commerce Department confirmed it has instructed staff not to enforce the rule inherited from the previous administration.

What Biden's rule proposed

The 'AI Diffusion Rule' was introduced by Biden in January and was set to take effect on May 15. Its core idea was to divide every country in the world into three tiers based on how much trust Washington placed in them.

Tier 1 countries, including Japan and South Korea, would have continued facing no restrictions on importing U.S. chips. Tier 2 countries, a category that included nations like Mexico and Portugal, would have faced limits on purchasing these components for the first time. And Tier 3 countries, led by China and Russia, would have seen already-existing controls tightened further.

In essence, it was an attempt to order global access to the computing power fueling large AI models, treating allies, neutral countries and strategic rivals differently.

The Trump administration's pivot

Rather than replacing the rule with an immediate new regulation, the Commerce Department has chosen to leave a temporary gap while it prepares an alternative. According to Bloomberg, the future rule will focus on direct country-by-country negotiations rather than blanket restrictions applied across blocs of nations.

It's a significant philosophical shift: moving from a fixed-tier architecture designed to provide predictability and automatic enforcement, to a model of bilateral deals that depends on case-by-case negotiation. That approach gives Washington more room to reward or penalize specific partners, but it also introduces more uncertainty for companies that rely on clear rules to plan their exports.

Until new regulations are in place, the Commerce Department has released guidance for the industry. It reminds companies that using Huawei's Ascend AI chips anywhere in the world violates U.S. export rules. It also warns about the potential consequences of letting U.S.-made AI chips be used to train AI models in China, and recommends measures to protect chip supply chains from diversion tactics aimed at third countries.

The political justification

Jeffrey Kessler, Under Secretary of Commerce for Industry and Security, defended the decision with a clearly ideological message. "The Trump Administration will pursue a bold, inclusive strategy to American AI technology with trusted foreign countries around the world, while keeping the technology out of the hands of our adversaries," he said in a statement. "At the same time, we reject the Biden Administration's attempt to impose its own ill-conceived and counterproductive AI policies on the American people."

The statement sums up the underlying argument: this isn't just a technical disagreement over how to classify countries, but an explicit rejection of the previous administration's regulatory approach.

What changes for the industry

With the repeal, the framework that would have governed, starting this week, AI chip exports to dozens of countries with no prior specific restrictions vanishes overnight. Uncertainty persists over what conditions will govern future U.S. chip purchases in those countries that fell under the old Tier 2.

This week's guidance makes clear that controls targeting China and players like Huawei remain in place. What's left up in the air is everything else: how intermediate allies will be treated, the fine print of future bilateral deals, and the timeline on which the Commerce Department plans to formalize this new approach.