Breakingviews - Chip export taxes flunk fiscal and security tests
The Trump administration's new arrangement reopens a big market for the primary U.S. designers of graphics processing units, the bedrock of AI development. Nvidia's H20 is the gold standard, outpacing alternatives thus far developed in China despite relying on generation-old technology.
President Trump dismissed it as an obsolete chip that China already has. Judging by predicted demand, though, it's still a hot property. Bank of America analysts estimated that reopening exports could win Nvidia up to $10 billion in revenue from China in the next six months. Annualized, that implies $3 billion of levies, against an overall expected tax bill of $19 billion this year, according to Visible Alpha data. While CEO Jensen Huang can probably stomach the hit on this product – reusing aging tech is cheaper, after all – it's a big increase.
For the U.S. Treasury, though, company-by-company needling is a terribly inefficient way to raise revenue. It follows a pattern of chasing small-ticket items, including $5 million immigration 'Gold Cards,' university settlements, and high tariffs meant to solve an array of geopolitical challenges, from Russian oil exports to the Brazilian judiciary. Commerce Secretary Howard Lutnick, opens new tab, too, has led an effort to charge for more government services.
Even broad-based tariffs are insufficient to plug the fiscal gap, despite Trump's stated dream of replacing most taxes with duties. Sure, revenue from import levies has surged to over $100 billion so far in 2025. But the government spends about $7 trillion annually.
This case is even worse, muddling any coherent security approach to AI proliferation and the dream of a competitive tax code to boot. If every trade flow that attracts political attention – whether into or out of the country – is subject to an ad hoc surcharge, efficiency goes out the window. The heavy hand of government is everywhere, even as tax revenue slips through its fingers.
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