President Donald Trump has introduced a controversial new approach to trade policy by striking agreements with two major American producers of computer chips, Nvidia and Advanced Micro Devices (AMD). This deal allows these companies to export products to China in exchange for a 15 percent cut of their revenue from the sales. This bold maneuver not only reflects Trump's transactional trade policy but also signals a significant shift in the U.S. government's relationship with its corporations, particularly in the tech sector.
The agreements with Nvidia and AMD come at a time when there is growing bipartisan concern regarding China's threat to American leadership in artificial intelligence (AI). By permitting these companies to export certain chips to China—specifically AI chips—while extracting a portion of the profits, Trump is testing the boundaries of existing laws, including a constitutional prohibition against export taxes. This unprecedented decision raises alarms among trade and national security experts, who fear that similar arrangements could be imposed on other American tech firms.
Scott Kennedy, a senior adviser at the Center for Strategic and International Studies, commented that many companies across various industries are now reassessing the potential risks of Trump's new approach. He warned that this could signify a dramatic change in how the U.S. government interacts with American businesses.
Former National Security Council director Liza Tobin labeled the deals as a “dangerous precedent.” She highlighted that the agreements essentially commodify national security restrictions on sensitive technology, allowing major corporations to pay for privileges previously reserved for national interests. This raises questions about the integrity of national security protocols and the potential for exploitation by other corporations seeking similar deals.
Trump and his supporters argue that it's reasonable for American companies to contribute to the U.S. government when they succeed in international markets. They believe that maintaining China's reliance on U.S. technology will ensure that American innovators stay ahead. During a White House press conference, Trump elaborated on his negotiations with Nvidia, stating, “If I’m going to do that, I want you to pay us as a country something because I’m giving you a release.” Initially, Trump considered a 20 percent cut but was persuaded by Nvidia's CEO, Jensen Huang, to settle for 15 percent.
The deal unlocks billions of dollars in potential sales for both companies. Nvidia had previously projected $7.1 billion in sales for its H20 chips, but lost a significant portion due to export restrictions. Under the new agreement, Nvidia would receive the revenue while paying approximately $1.1 billion to the U.S. government. This financial arrangement raises questions regarding the legality of such deals, as they appear to conflict with the U.S. Constitution's ban on export taxes.
Legal experts have pointed out that shareholders of Nvidia and AMD could pursue lawsuits, arguing that the executives compromised potential revenue by accepting Trump's terms. However, investors might also see the value in generating some revenue from China rather than facing a complete export ban. Following the announcement of the deals, leading industry groups such as the U.S. Chamber of Commerce and Semiconductor Industry Association remained notably silent, raising further questions about the consensus within the tech community.
Since taking office, Trump has wielded trade policy and legal threats to mold the tech industry to his preferences. Major tech CEOs have frequently visited the White House for discussions on policy and investment. Despite earlier tensions, companies like Apple and Nvidia have pledged substantial investments in the U.S., often in response to Trump's tariff threats on Asian supply chains.
The agreements with Nvidia and AMD mark a departure from longstanding bipartisan U.S. policies governing chip exports, primarily centered around national security. As AI technology gains importance, both Trump and President Joe Biden have tightened export restrictions on advanced computer chips to China. The recent loosening of these restrictions, however, has led to a complicated interplay between maintaining national security and fostering economic growth.
The recent policy shifts are a reflection of internal divisions within Trump's administration regarding the future of U.S.-China tech relations. While some advisors advocate for a complete technological decoupling from China, others emphasize the importance of allowing U.S. companies to maintain a competitive edge. Tobin warned that the current approach could ultimately favor China, allowing it to catch up in the global AI race.
Experts like Chris Miller, a professor at the Fletcher School at Tufts University, caution that even if China gains access to American chips in the short term, the country remains committed to developing its own semiconductor capabilities. The ongoing investments in research and development demonstrate China’s determination to achieve technological self-sufficiency, regardless of U.S. export policies.
As the landscape of international trade and technology continues to evolve, the ramifications of Trump's agreements with Nvidia and AMD will likely resonate throughout the tech industry, shaping future policies and corporate strategies.
