Is It a Tax, or a Payoff?
A deal for Nvidia and AMD to give the Trump administration a cut of chip sales to China raises questions about national security and trade policy goals.
The Trump chip commission
As President Trump has waged trade wars around the globe, he has said that his goal is to establish American superiority in international commerce and in key areas like artificial intelligence.
But news that his administration struck a deal in which Nvidia and Advanced Micro Devices agreed to pay the U.S. 15 percent of what they make in selling A.I. chips to China in exchange for export licenses raises key questions. What is Trump’s actual end goal when it comes to trade? And is his approach putting Washington’s lead in A.I. — and national security — at risk?
The TL;DR: Nvidia’s C.E.O., Jensen Huang, met with Trump at the White House on Wednesday and agreed to fork over a portion of sales of H20 processors; the Commerce Department granted the licenses two days later, The Times reports. (AMD reached a similar agreement for its MI308 chip.)
Huang had called for Nvidia to be allowed to do more business with China, warning that Chinese rivals like Huawei would otherwise take market share.
The highly unusual move could mean big numbers: Nvidia is expected to sell more than $15 billion worth of H20 chips through the end of the year and AMD about $800 million worth of MI308 processors, according to Bernstein Research. That could yield more than $2 billion in revenue to the U.S. government.
What is the policy trying to accomplish? It’s a question that has also been raised by the tariff barrage, which was often described as a way to rebalance global trade — but has also been cited as a way to generate revenue. (“The good news is that Tariffs are bringing Billions of Dollars into the USA!” the president said recently on social media.)
Trump’s approach worries China hawks. They’re concerned that allowing Chinese companies to get even lesser chips like the H20 could still bolster America’s main rival in a key technology, especially one highly useful for military applications. And that it could lead to Beijing making similar demands on other companies to loosen restrictions.
“What’s next — letting Lockheed Martin sell F-35s to China for a 15 percent commission?” Liza Tobin, who previously served as China director at the National Security Council during the Trump and Biden administrations, told The Financial Times.
A bigger test of Trump’s approach to China looms: The F.T. reports that Beijing has pressed Washington to relax export restrictions on high-bandwidth memory chips, which were imposed last year by the Biden administration. Experts say that resuming those sales could help Huawei and other Chinese companies eventually produce chips whose performance rivals Nvidia’s.
Remember that sky-high tariffs on China are set to take effect tomorrow, though Commerce Secretary Howard Lutnick said last week that a 90-day delay was probable. With pressure building on the Trump administration to reach a trade deal with China and with Nvidia potentially setting a precedent of companies paying for export licenses, what will the president do?