Small deal with big risks: how the introduction of the "export tax" in the USA will turn out

US President Donald Trump told reporters on Friday, August 15, on his way to Anchorage that duties on US semiconductor imports could reach 300%. And early last week, he allowed Nvidia and Advanced Micro Devices (AMD) to supply China with chips for artificial intelligence, the export of which was previously restricted. The condition is that the companies will contribute 15% of such sales to the budget.

"To call it unusual or unprecedented would be a strong understatement," Stephen Olson, a former U.S. trade negotiator now at Singapore's ISEAS - Yusof Ishak Institute for Southeast Asian Studies - commented to Bloomberg. - This is actually a monetization of U.S. trade policy in which U.S. companies have to pay the government for export permits. If this is the case, we have entered a new and dangerous world."

Such a "deal," as Trump likes to say, could simply be unconstitutional, the lawyers say, stipulating that they cannot say so definitively because no one has done so so far. It may be a step toward turning the U.S. economy into state capitalism.

Nvidia will share 15% of revenue from sales of its H20 processor in China, Trump said on Monday, August 11. He said he initially offered to contribute 20% for the H20 export authorization, but the two sides eventually made a "small deal," agreeing on 15%. AMD will contribute a similar share from sales to China of its MI308 processor.

Nvidia developed the H20 specifically for China after Joe Biden's administration imposed export restrictions on its more advanced AI chips in late 2023. The H20 has less processing power than Nvidia's top-end models, but its memory bandwidth is enough for the AI to recognize patterns and draw logical conclusions. Chinese chip makers are lagging behind in producing advanced models and are not producing AI processors in sufficient quantities to meet market demand.

In April, the Trump administration tightened export controls, banning the sale of chips to China without authorization, which Nvidia CEO Jensen Huang said "effectively closed" the Chinese market, including for the H20. But in July, Washington said it would allow Nvidia and AMD to resume sales of specialized chips for China. The U.S. administration wants Chinese developers to "become dependent" on U.S. technology, Commerce Secretary Howard Lutnick said, adding that the H20 is not Nvidia's top AI chip, but "only its fourth."

Huang also said that the US should supply chips to China so it doesn't invest in its own infrastructure, and for military and government purposes, Nvidia processors won't be used for military and government purposes anyway, so US national security concerns are unnecessary.

"Whoever lobbies for the tech sector in Washington is working off every penny they get paid," commented Jon Treacy, publisher of investment newsletter Fuller Treacy Money, on the agreement to pay 15% in exchange for permission to resume sales to China.

But such a deal poses many risks. U.S. congressmen from both parties have expressed concern about the birth of a practice in which national security restrictions that have hitherto been non-negotiable can be lifted by paying a certain amount of money.

"Export controls are the front line of protecting our national security, and we should not set a precedent that encourages the government to license the sale of technology to China that will enhance its AI capabilities," said Republican John Moolenar, who chairs the House Select Committee on China. Raja Krishnamurthy, the top Democrat on the same committee, added (both quotes are from Reuters): "This is how we make it clear to China and our allies that American national security principles can be discussed at an appropriate cost."

The pause in the U.S. trade war with China, during which such decisions are emerging, seems to be part of a "grand bargain aimed at peaceful coexistence" in economics and trade, Tricey believes. Drew DeLong, head of the geopolitical dynamics practice at consultancy Kearney, agrees: "Clearly, the administration is seeking to take a softer stance on national security in these negotiations."

Trump's arrangement with Nvidia and AMD also creates a legal conflict. The U.S. Constitution prohibits levies on exports. And Trump's deal "certainly looks like an export tax," says Kyle Handley, a professor at the School of Global Policy and Strategy at the University of California, San Diego. "They can call it whatever they want. In reality, it looks a lot like the government is pinching off a chunk for itself."

Trade law lawyer Jeremy Ilulian is more cautious in his assessment. In his opinion, without knowing the details of the arrangement, it is difficult to say whether it will be considered an export tax: "To date, the question of how much companies have to pay to obtain an export license has never even been considered."

Authorities and companies are entering "a slippery slope", Reuters quotes Bernstein analysts as saying. According to them, the gross profit of Nvidia and AMD from sales to China may decrease by 5-15 percentage points, and the combined result - by 1 p. p. For sellers of strategic goods in China, such payments "can be a burden, and can be a lifeline to maintain access to a market with huge and growing opportunities," said Henry Susanto, portfolio manager Gabelli.

Looking at the situation in a broader context, a precedent is being set for taxing critical U.S. exports, Bernstein analysts add. "There are no restrictions anymore," laments Deborah Elms, director of trade policy at the Hinrich Foundation in Singapore. - "You can come up with different combinations for specific companies and countries along the lines of 'no one else can trade, but if you pay us directly, you can do it.'"

As if to back up her words, Treasury Secretary Scott Bessent told Bloomberg on Wednesday that the arrangement with Nvidia and AMD could serve as a model for other such agreements: "I think we could see this in other industries over time. It's unique right now, but now that we have a model and have done beta testing, why not expand it?"

He called Trump's deal a "very unique solution" that will allow taxpayers to get their "share" of the reward. The department will use the money from the companies to pay down the debt, Bessent said. Right now, nearly one in seven dollars in the budget (the largest spending item) goes to servicing the national debt, which is close to 100 percent of GDP.

Trump himself said on Monday that he would consider allowing Nvidia to also ship a version of its top-of-the-line Blackwell AI processor to China if the company cuts its performance by 30-50%.

While U.S. authorities have intervened in private businesses before, such as bailing out banks and automakers during the 2008 financial crisis, those were temporary measures, and the Nvidia and AMD deal is a precedent, and without proper oversight it could lead to a "crony capitalism state," says Scott Kennedy, a senior adviser at the Center for Strategic and International Studies in Washington.

"This is a huge shift in how the U.S. economy is supposed to function. Nobody is going to be happy about it, except maybe the Chinese, who will get their chips in and watch the U.S. political system go through turmoil and internal tensions," he told Bloomberg.

Trump is emulating China's Communist Party by increasing political control over the economy, writes Greg Yip, chief economic commentator at The Wall Street Journal.

It will certainly not be state capitalism in the Chinese way (or even in its milder versions - Russian, Brazilian or, at times, French), but "state capitalism with American specifics," he believes: "This is very different from the free-market ideal that the United States once embodied."

Recent examples, in addition to the Nvidia and AMD deal, include Trump's demand that Intel's CEO resign over his past business ties to China (and now the administration is also in talks to acquire a stake in the company, Bloomberg reported, citing people familiar with the plan).

In another example, Japan's Nippon Steel received approval from the U.S. administration to buy U.S. Steel on the condition that the White House would get a golden share in the absorbed steel company.

In addition, Washington has already "extracted" a promise from trading partners to invest $1.5 trillion in the United States.

And Trump also instructed Goldman Sachs to change economists after the bank released a report that two-thirds of the burden of higher prices from higher import duties would fall on consumers.

"The main characteristic of Chinese state capitalism is discipline, and Trump is the exact opposite of that," Yip cites the opinion of Dan Wang, author of "At Dizzying Speed: How China is Creating the Future."

It seems "anything can be negotiated for the current administration," says Sarah Kreps, a professor at Cornell University's Brooks School of Public Policy. And a deal with Nvidia and AMD, she believes, is far from the last.

This article was AI-translated and verified by a human editor