Efforts to ease trade tensions between the United States and China have hit a setback as a new dispute over semiconductor regulations reignites friction between the two global powers.

On Wednesday, China’s Ministry of Commerce issued a sharp rebuke to recent U.S. export restrictions targeting Huawei’s artificial intelligence chips, threatening legal action against those who comply with the rules. The warning, first reported by Bloomberg, marks a significant escalation in the ongoing technology standoff between Washington and Beijing.

The controversy centers on updated U.S. guidance issued May 13 by the Trump administration, which emphasized that the use of Huawei’s Ascend AI chips — even outside the U.S. — constitutes a violation of American export controls. That guidance was released in conjunction with the repeal of the Biden-era Artificial Intelligence Diffusion rule.

China swiftly condemned the move, accusing the U.S. of undermining progress made during recent trade discussions. Earlier this week, Beijing officials said the revised guidance jeopardized diplomatic momentum built through high-level talks aimed at stabilizing economic relations.

In response to the backlash, the U.S. Commerce Department has reportedly modified the language in the original May 13 guidance, removing the controversial phrase “anywhere in the world,” according to Bloomberg.

The dispute underscores the persistent challenges in U.S.-China relations, particularly around high-stakes sectors like semiconductors and artificial intelligence. Huawei, long a focal point of U.S. national security concerns, remains on the Entity List, restricting American companies from doing business with the Chinese tech giant without a special license.

With both sides trading accusations and issuing warnings, the clash over Huawei’s AI chips threatens to derail fragile progress and further entrench the technological divide between the world’s two largest economies.