President Trump views tariffs as a toll that he alone gets to set for access to U.S. markets. Now he’s charging fees on U.S. companies for the purported privilege of exporting artificial-intelligence chips to China. Mark this as another step toward government control of private business.
The Commerce Department imposed restrictions on the sale of Nvidia and Advanced Micro Devices AI chips to China this spring in the name of protecting “national and economic security.” China’s military-civil fusion strategy requires its companies to acquire technologies to advance the government’s military and intelligence capabilities.
Such export controls hurt Nvidia’s business in China, and the chip maker (market cap: $4.4 trillion) lobbied the White House to ease them. Voila, the Administration last month lifted the export restrictions in return for China easing controls on rare earth exports.
“We held it up, and then, in the magnets deal with the Chinese, we told them that we would start to resell them,” said Commerce Secretary Howard Lutnick. Treasury Secretary Scott Bessent said resuming H20 sales was “all part of a mosaic.”
Now we’re seeing the rest of the mosaic, and it’s not pretty. The Administration is demanding a 15% cut on sales of Nvidia’s H20 and AMD’s MI308 chips to China. Want to do business? Pay Paulie. It’s not clear whether the Administration plans to use the cash to pay down the deficit, spend it, or use it for its mooted sovereign wealth fund.
In any case, this is an export tax that Congress didn’t authorize. Will AMD or Nvidia challenge the political extortion in court? Selling chips in China may be more important to them than defending the legal principle that the government can’t willy-nilly shake down companies.
There’s a reasonable argument that AI chip restrictions haven’t been effective. The Biden team imposed restrictions on AI chip exports to China in 2022, but Nvidia then developed lower-power AI chips to get around them. The Chinese have also smuggled AI chips and built the advanced large-language model DeepSeek with computational workarounds.
Nvidia argued that the restrictions benefit Beijing’s national chip champion Huawei and would result in China setting global AI standards rather than the U.S. Perhaps. But the Administration earlier insisted it wasn’t using chip controls as leverage in trade talks. Relaxing its curbs in exchange for trade concessions from China and payments from chip makers suggests the Administration’s real priority is deal-making in pursuit of more revenue.
Step by step, Mr. Trump is expanding the long arm of the state into more of the private economy. Will any Republican object? Alas, probably not.
