President Trump’s reversal on previously blocked chip sales to China has sparked cries that the White House is selling out America’s security concerns in a bid to raise revenue.
Trump on Monday agreed to allow tech giants Nvidia and AMD to secure export licenses to sell their advanced artificial intelligence (AI) chips in China in exchange for a 15 percent cut of the profits.
The White House said Tuesday that more such deals could be on the table.
The unusual deal doesn’t just raise legal questions. Experts say the U.S. should be wary of turning over American-made technology that could boost its adversary’s AI capabilities, at a time when the two countries are fiercely competing for dominance.
The security concerns appear to be a two-way street. China urged tech companies there to avoid any purchase of the chip, citing security issues.
The move once again has Trump at odds with Congress’s China hawks, who argue the administration is shortchanging America’s national security interests to make a buck.
Rep. Raja Krishnamoorthi (Ill.), the top Democrat on the House Select Committee on the Chinese Communist Party, in a statement said the most troubling part of the deal was a contradiction at the heart of the policy.
“The administration cannot simultaneously treat semiconductor exports as both a national security threat and a revenue opportunity,” he said. “By putting a price on our security concerns, we signal to China and our allies that American national security principles are negotiable for the right fee.”
The same panel’s GOP chair, Rep. John Moolenaar (Mich.), said there are “questions about the legal basis” for such a deal.
“Export controls are a frontline defense in protecting our national security, and we should not set a precedent that incentivizes the Government to grant licenses to sell China technology that will enhance its AI capabilities,” he said in a statement.
Greenlighting the sales marks a reversal for the Trump administration, which in April initially imposed restrictions on Nvidia’s H20 chip and AMD’s MI308 chip, effectively blocking shipments to China.
Commerce Secretary Howard Lutnick has argued China is only receiving Nvidia’s “fourth best” chip, but this has done little to assuage concerns.
The administration has increasingly taken up the mantle, supported by the semiconductor industry, that the U.S. should focus on boosting the adoption of U.S. technology abroad rather than imposing more stringent export restrictions.
The reasoning follows that the best way to win the AI race is to keep China dependent on American-made chips and prevent Huawei from gaining ground both inside and outside of China.
Others contend this will simply boost Beijing’s capabilities in a way that would be impossible without the U.S. technology.
“We’ve got to realize we’re in an intellectual war, a technology war with China, and we’re in an AI competition. Having Nvidia providing this technology to China is a mistake,” Rep. Don Bacon (R-Neb.) said during an appearance on “The Hill” on NewsNation.
“China getting our chips is not a good deal.”
National security experts say the risks are manifold. Not only do the sales boost China in what many see as a technological cold war, it also opens the door to the risk the communist government could use chips for military technology or other uses that directly threaten the U.S.
Liza Tobin, who served as China director at the National Security Council under the first Trump and Biden administrations, said chip producers only have so much capacity, so shipping them to China shortchanges others.
“It’s putting a priority on China’s AI development at the expense of American or other countries’ AI development,” she told The Hill.
She also expressed concern over chips being used for “malign purposes that potentially harm and kill American men and women in uniform.”
“These chips themselves are inherently dual use. It’s not like these are just made for the military or have some limit on them to only be allowed for cat food apps. That’s just not how it works.”
Nvidia on Tuesday argued the sales will help the U.S. become a technology leader with little risk to either party.
“As both governments recognize, the H20 is not a military product or for government infrastructure,” the company said in a statement. “China has ample supply of domestic chips to meet its needs. It won’t and never has relied on American chips for government operations, just like the U.S. government would not rely on chips from China. Banning the sale of H20 in China would only harm U.S. economic and technology leadership with zero national security benefit.”
Peter Harrell, a nonresident fellow at the Carnegie Endowment for International Peace, said the export control licenses Trump is now negotiating with companies were expressly designed to weigh those types of national security risks.
“It’s a very troubling precedent because historically when we’ve been looking at export control licenses, it’s been strictly speaking a national security review,” Harrell said. “Does the export of this widget threaten U.S. national security? Whereas now, there’s also going to be this factor of, ‘Well maybe it does threaten U.S. national security … but hey, we got some money from it.’”
“I think it would be quite negative for us if we get in the business of ‘We’re happy to arm our adversaries as long as they pay us a bit of money to do so.’ I hope that’s not where we are. I do worry that this could become a broader precedent.”
White House press secretary Karoline Leavitt said Tuesday that the administration would consider other similar arrangements in spite of legal concerns.
“Right now, it stands with these two companies. Perhaps it could expand in the future to other companies,” Leavitt said. “I think it’s a creative idea and solution. The legality of it, the mechanics of it is still being ironed out by the Department of Commerce.”
“This was another idea of the president and his brain trust on his trade team to try to get good deals for the American people and the American taxpayer,” she added.
It’s not clear such deals would be legal. Export taxes are barred by the Constitution, while fees for export licenses are prohibited under federal law. However, it’s unclear whether the 15 percent cut from Nvidia and AMD’s chip sales would count as a formal tax or fee, as well as whether anyone would bring such a challenge.
Still, several raised concerns about the precedent set by the deal, noting there are many other American-made products China would be interested in purchasing that could be detrimental to U.S. interests.
“Are we now going to see the Commerce Department shaking down high-tech exporters generally for a 15 percent cut? Are we going to see the State Department, which regulates exports of defense weaponry, start shaking down defense exporters for a 15 percent cut?” Harrell asked.
“I have to assume that there would be some lines, maybe it is F-35s. Would he sell nuclear weapons? You have to think there are some lines that Trump wouldn’t cross. But this is blowing past a bunch of past precedent, and I think suggests that whatever lines he does have that he would not be willing to cross are very, very different from the lines any previous president would have had.”
Rep. Jake Auchincloss (D-Mass.) noted that Trump has also sought to bypass a law passed by Congress and signed by former President Biden that would block the popular app TikTok unless the China-based ByteDance sells the company.
Born out of fears that Chinese law could require the app to hand over data on Americans, Trump has punted enforcement, signing three separate extensions.
“So now the US government is financially motivated to sell AI to China?” Auchincloss wrote on the social platform X. “Makes me shudder to think what a TikTok deal might look like.”
Tobin, however, said China is likely to set their sights on securing more advanced chips than the H20, including the Blackwell, which is still under development. Trump suggested Monday that he would consider making a deal on a reduced-capacity version of the Blackwell.
Trump’s dealmaking, Tobin said, will suggest to the Chinese that such things are now open to negotiation, a dynamic she warns the government is also using with Nvidia.
China’s warning not to immediately order Nvidia’s chips serves a twofold purpose, she said, one that allows them to exert some control over the company while opening the door to demanding information about the chips that could aid in their replication.
“They know there are technical means that could potentially be weaponized,” she said, adding that while China has “rational” security concerns, the move is also “a pretext for squeezing out more from Nvidia” by a country that has previously required companies to share their intellectual property.
“The Chinese government has already been calling Nvidia in to explain whether its chips are secure, and that’s a way to put Nvidia on notice and say, ‘Hey, you better be behaving the way we want you to, or else we’re going to make it very painful for you to stay in the China market.’”
Nvidia has previously said it would not send “any [graphics processing unit] designs to China to be modified to comply with export controls.”
“Our products are extraordinarily complex and take tens of thousands of engineering years to create, and by the time an NVIDIA product is available in the market, we are already far along in our design of the next one,” a spokesperson said Tuesday.
Any Chinese advances may mean the deal may only be of short-term value to Nvidia, Tobin argued, but it’s one she said the government should shield against.
“The role of government is to put the guardrails on so that private interests don’t control our national security,” Tobin said.
Updated at 7:09 a.m. EDT