Selling advanced semiconductors to power China’s AI industry is fine now — so long as the federal government gets its cut.
Leading America’s lurch toward state-directed capitalism, President Trump has a new scheme to extort wealth from private industry in exchange for government favors. All while circumventing the Constitution and making a mockery of an export control system that supposedly exists to serve national security. Not anymore, it doesn’t.
The president has struck a “deal” with the makers of advanced semiconductors designed to power artificial intelligence: He will refrain from using government’s coercive power to ban the export of their products to China, so long as they cut his administration in on the revenue. Trump is easing export controls on two AI chips made by Nvidia and AMD, respectively, allowing Chinese technology firms to procure them. Fifteen percent of the money from those sales will now flow into the U.S. Treasury, as compensation for Trump’s magnanimity. This “agreement” — in which the government obtains money from specific companies through force — is the definition of extortion.
Nvidia and AMD are thrilled to comply with Trump’s terms. They are desperate to sell their chips to China as its AI industry rapidly expands, fueled by a coordinated effort to outcompete America. China is expected to spend $98 billion on developing AI this year, $56 billion of which comes from the Chinese government. American semiconductor firms desperately want a piece of that action, hoping to see their chips installed in hundreds of data centers across the repressed land.
That aspiration was stalled under the Biden administration, which imposed export controls on advanced semiconductors in 2022 and 2023 to limit Chinese access. A stated goal of these restrictions was to maintain America’s advantage in AI, extending beyond military applications to the entire burgeoning industry. Chipmakers were ordered not to sell semiconductors to China that exceeded certain performance thresholds.
In response, Nvidia and AMD developed AI chips specially for the Chinese market that were similar to — but slightly less powerful than — their cutting-edge models. Chipmakers thus continued to supply China with the chips to fill its AI data centers, albeit less capable ones than American firms could access. In April of this year, however, the Trump administration expanded Biden’s export controls to cover those chips designed to comply with export controls on China, effectively banning their sale.
An abrupt policy reversal was seemingly made last month — after Trump met with Nvidia CEO Jensen Huang — when Nvidia and AMD announced that the administration would grant licenses for them to resume sales of China-specific chips. Yet no licenses were actually issued for a month. That brings us to Sunday’s revelation that the licenses were conditional. Huang had negotiated a deal with Trump to share 15 percent of the revenue from China sales with the federal government.
The purpose of U.S. export controls, as authorized by Congress, is to serve national security interests by limiting foreign access to potentially dangerous materials and technologies. It is not to extort American companies into handing the government billions of dollars. But that is what Trump has done. He is allowing China to access advanced AI semiconductors — an arrangement that his administration determined was incompatible with national security just months earlier — in exchange for a payoff. That is not the faithful execution of the nation’s laws. It is the flagrant exploitation of them.
Trump has cleverly created an export tax on AI chips to complement his cherished suite of import taxes on everything else. Article I of the Constitution, which enumerates the powers of Congress, states that “No Tax or Duty shall be laid on Articles exported from any State.” Trump’s lawyers might respond that Congress had nothing to do with this process. What else is new?
In fact, Congress created the export control law that Trump has leveraged to extract revenue. But if the law applies only to products that the president deems a threat to national security, and if Trump thinks it’s fine for America’s chief adversary to have advanced AI semiconductors for a fee, then are the chips actually subject to the export control law whatsoever?
Of course, Trump does not care about such irrelevant questions. Congress and the statutes it writes are ornamental to his conception of national governance. And Trump emphatically agrees with a sentiment voiced by his vice president that is antithetical to American conservatism: “There is no meaningful distinction between the public” — meaning his — “and the private sector in the United States of America.” So, look forward to more “deals” with American companies that find they must grovel before the president to keep business running.