Trump's pay-for-play chips deal generates alarm and optimism
Experts and sources familiar with the matter said that the surprise deal, in which Nvidia and Advanced Micro Devices (AMD) agreed to pay 15 per cent of their revenues from Chinese AI chip sales to the US, potentially provides a path to enter the Chinese market despite severe export controls, tariffs and other trade barriers.
The question that companies must now confront is whether the risk is worth taking. Sources familiar with the matter, who asked not to be identified discussing private deliberations, said that companies are struggling to figure out what the president's order means for their future, especially given the unpredictable nature of Trump's decision-making.
'This is truly bizarre and unusual, and the troubling thing, beyond the individual instances of AMD and Nvidia, is the possibility that this will be expanded,' said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. 'Everything is now 'national security', according to the new definition, which means it's all subject to export licenses and then they give you a license based on your contribution.'
There are concerns that US trade agencies could begin charging fees to companies every time there's a meeting to discuss tariffs, according to sources familiar with the matter who asked not to be identified discussing private deliberations.
The Commerce Department's Bureau of Industry and Security, which issues export licenses, was not consulted about the revenue deal, according to sources familiar with the matter who asked not to be identified discussing private conversations.
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Trump administration officials defend the idea as a smart way to generate revenue for the US government and suggest it will extend well beyond the chips sector.
'I think we could see it in other industries over time,' Treasury Secretary Scott Bessent said on Wednesday. 'I think right now this is unique, but now that we have the model and the beta tests, why not expand it?'
Bessent defended the deal and rejected any national-security concerns around the decision to sell Nvidia's H20 chip to China, something that had been earlier barred for fear of giving China a boost in the artificial intelligence (AI) race.
'There are no national security concerns here,' Bessent said. 'We would not sell any of the advanced chips. So, the H20, I don't know whether you'd say they are four, five, six levels down the chips stack.'
Either way, the deal highlights how Trump has pushed to open a wave of new revenue streams, including by taking ownership shares of companies or extracting higher fees to live or work in the US.
The US is weighing sales of a so-called 'gold card' residency permit, it won a 'golden share' to have direct say over corporate actions by United States Steel, and it's secured investment pledges and potential revenue-sharing in country-level tariff talks. That's aside from the barrage of product tariffs that have at times left massive dislocations in globally traded markets.
The matter further surprised China hawks in Congress, who have been unimpressed by the administration's reassurances. Rep John Moolenaar, the Michigan Republican who chairs the US House Select Committee on China, questioned the legal basis for the move and suggested it does an end-run around controls put in place to limit the sale of sensitive technology to US adversaries.
'Export controls are a front-line defence in protecting our national security, and we should not set a precedent that incentivises the government to grant licenses to sell China technology that will enhance its AI capabilities,' he said.
It also raises questions about where the administration will steer the revenue. Trump has mused about issuing tariff rebate checks, though he has yet to seriously pursue the idea, while at other times, he's said that it would go towards narrowing the large budget deficit.
The administration had debated launching a sovereign wealth fund before shelving those plans for now. It's too soon to say whether the administration will seek to revive the fund and steer revenue there, one official familiar with deliberations said.
'Trump's aides argue that these measures will strengthen America's AI leadership by maximising its global influence and market share,' Hal Brands, a professor at the Johns Hopkins School of Advanced International Studies and a former Pentagon official, wrote in Bloomberg Opinion. 'Yet it is also possible that they will simply eat into America's innovation advantage.' BLOOMBERG
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Straits Times
an hour ago
- Straits Times
Putin wins Ukraine concessions in Alaska but did not get all he wanted
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Straits Times
2 hours ago
- Straits Times
Suffering Ukrainians dismayed by outcome and optics of Trump-Putin summit
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Straits Times
3 hours ago
- Straits Times
Nordic-Baltic leaders say they remain steadfast in support of Ukraine
U.S. President Donald Trump and Russian President Vladimir Putin walk to a joint news conference following their meeting at Joint Base Elmendorf-Richardson in Anchorage, Alaska, U.S., August 15, 2025. Sputnik/Gavriil Grigorov/Pool via REUTERS/File Photo The leaders of eight Nordic-Baltic nations said on Saturday that they remain steadfast in their support for Ukraine and to the efforts by US President Donald Trump to end the Russian aggression against Ukraine. The leaders of Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway, and Sweden said in a statement that achieving peace between Ukraine and Russia requires a ceasefire and security guarantees for Ukraine. "We welcome President Trump's statement that the US is prepared to participate in security guarantees. No limitations should be placed on Ukraine's armed forces or on its cooperation with other countries," the statement said. Trump has said that he had agreed with Putin that a peace deal should be sought without the prior ceasefire that Ukraine and its European allies, until now with US support, have demanded. REUTERS
