Latest news with #GaryHufbauer
The Hill
4 days ago
- Business
- The Hill
Trump's chip deal raises legal questions
The two firms have agreed to share 15 percent of the revenue generated from selling advanced artificial intelligence (AI) chips to China in order to secure export licenses after a months-long pause, a U.S. official confirmed to The Hill on Monday. 'It's bizarre in many respects and pretty troubling because Congress didn't have anything to say about this,' said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics. 'It's just the president's own negotiating with the individual companies,' he continued. 'That's not how, historically, we've done business in this country.' Under the agreement, Nvidia will share 15 percent of its revenue from H20 chip sales to China, while AMD will share the same portion of its MI308 chip sales. Both of the Nvidia and AMD chips in question, which are graphics processing units (GPUs) designed for the Chinese market with U.S. export controls in mind, faced new restrictions from the Trump administration in April, effectively blocking sales to China. Last month, Nvidia and AMD said the U.S. government had assured them it would begin approving export licenses for the H20 and MI308 chips, although the Commerce Department reportedly did not start issuing licenses for several weeks. The new revenue-sharing agreement comes after Nvidia CEO Jensen Huang met with President Trump at the White House last week, according to Bloomberg. Huang has found himself in a tricky situation, balancing Washington and Beijing's interests as both countries vie for AI dominance. The agreement appears to remove a major impediment for both companies. Nvidia said earlier this year it incurred $4.5 billion in charges associated with the chip restrictions in the first quarter and expected an $8 billion sales hit in the second quarter. AMD forecast a $1.5 billion hit to revenue this year. The deal represents a notable shift in how the government approaches export controls. 'It's quite extraordinary because it turns the export control function of the government into a money-raising proposition, and that's never happened before,' Hufbauer said.
Yahoo
4 days ago
- Business
- Yahoo
‘Bizarre' Nvidia, AMD chip export deal with Trump raises legal questions
Two major chipmakers in the U.S., Nvidia and AMD, have struck an unusual agreement with the federal government to share some of their revenue from chip sales to China — a deal that experts say raises constitutional questions and may set a concerning new precedent. The two firms have agreed to share 15 percent of the revenue generated from selling advanced artificial intelligence (AI) chips to China in order to secure export licenses after a months-long pause, a U.S. official confirmed to The Hill on Monday. 'It's bizarre in many respects and pretty troubling because Congress didn't have anything to say about this,' said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics. 'It's just the president's own negotiating with the individual companies,' he continued. 'That's not how historically we've done business in this country.' Under the agreement, Nvidia will share 15 percent of its revenue from H20 chip sales to China, while AMD will share the same portion of its MI308 chip sales. Both the Nvidia and AMD chips in question, which are graphics processing units (GPUs) designed for the Chinese market with U.S. export controls in mind, faced new restrictions from the Trump administration in April, effectively blocking sales to China. Last month, Nvidia and AMD said the U.S. government had assured them it would begin approving export licenses for the H20 and MI308 chips, although the Commerce Department reportedly did not start issuing licenses for several weeks. The new revenue-sharing agreement comes after Nvidia CEO Jensen Huang met with President Trump at the White House last week, according to Bloomberg. Huang has found himself in a tricky situation, balancing Washington and Beijing's interests as both countries vie for AI dominance. 'We follow rules the U.S. government sets for our participation in worldwide markets,' an Nvidia spokesperson said in a statement. 'While we haven't shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide.' 'America cannot repeat 5G and lose telecommunication leadership,' they added. 'America's AI tech stack can be the world's standard if we race.' Nvidia dominates the market for GPUs, the chips powering the AI boom, fueling the company's rapid growth over the past few years. It became the first company in the world to reach a market capitalization of $4 trillion last month. AMD holds a much smaller share of the market, although it remains a key player. The agreement appears to remove a major impediment for both companies. Nvidia said earlier this year it incurred $4.5 billion in charges associated with the chip restrictions in the first quarter and expected an $8 billion sales hit in the second quarter. AMD forecast a $1.5 billion hit to revenue this year. The deal represents a notable shift in how the government approaches export controls. 'It's quite extraordinary because it turns the export control function of the government into a money-raising proposition, and that's never happened before,' Hufbauer said. The U.S. government is barred from imposing taxes on exports under both the Constitution and federal law. 'In addition to the policy problems with just charging Nvidia and AMD a 15% share of revenues to sell advanced chips in China, the US Constitution flatly forbids export taxes,' Peter Harrell, a nonresident fellow at the Carnegie Endowment for International Peace, wrote in a post on X. 'In addition to the Constitution, 50 USC 4815(c) expressly prohibits fees for export control licenses,' Harrell, who served as senior director of international economics in the Biden administration, added. It's unclear whether the 15 percent cut from Nvidia and AMD's revenues would count as an export tax because 'it looks like the companies just decided to make this payment in order to further their business,' Hufbauer noted. It's also not entirely clear who would have standing to challenge the move in court — an outcome Hufbauer suggested is ultimately unlikely. Even so, the agreements with Nvidia and AMD are likely to face pushback. The Trump administration's decision to allow Nvidia to resume H20 sales to China has already been a source of concern among both Democrats and Republicans, who have warned that it could boost Beijing's AI capabilities. Commerce Secretary Howard Lutnick has argued the administration is only giving China Nvidia's 'fourth best' chip. This represents an approach to export restrictions, largely supported by the semiconductor industry, that chipmakers should be allowed to sell some chips to China to prevent its national champion Huawei from gaining ground. However, the administration's latest move creates a new set of concerns. 'It raises concerns, certainly for many national security minded folks, of — are we now selling export control licenses? Is there a way that Nvidia will be able to buy licenses to sell more advanced chips than they're currently able to?' said Owen Tedford, a senior research analyst at Beacon Policy Advisors. Stacy Rasgon, a senior analyst at Bernstein Research, underscored that it makes sense for Nvidia and AMD to take a 15 percent cut because '85 percent is better than nothing.' However, he added, 'It feels like a little bit of a slippery slope. What's next? Where does it stop? Does it stop with China AI? Does it move to other China stuff that's under export control? In that case, sometimes there's a reason that there's export controls. Can you buy your way out of them? Strategically that's not great.' The deals could be a 'template' that other companies facing export controls try to follow, Tedford noted. 'It's somewhat unique in the way that they only would have happened with Trump as president,' he said. 'If we'd had a Biden or Harris administration and even if you'd had the same kind of on and off of these H20 chips, this really speaks to Trump's transactional nature, his desire to get some sort of win.' 'It raises questions about how — and I think this gets to some of more general concerns with the Trump administration — just policy feels like it's for sale in some ways, like policy outcomes,' Tedford added. 'If companies are big enough or strong enough, they can basically buy the policy that they want from the Trump administration.' Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
The Hill
4 days ago
- Business
- The Hill
‘Bizarre' Nvidia, AMD chip export deal with Trump raises legal questions
Two major chipmakers in the U.S., Nvidia and AMD, have struck an unusual agreement with the federal government to share some of their revenue from chip sales to China — a deal that experts say raises constitutional questions and may set a concerning new precedent. The two firms have agreed to share 15 percent of the revenue generated from selling advanced artificial intelligence (AI) chips to China in order to secure export licenses after a months-long pause, a U.S. official confirmed to The Hill on Monday. 'It's bizarre in many respects and pretty troubling because Congress didn't have anything to say about this,' said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics. 'It's just the president's own negotiating with the individual companies,' he continued. 'That's not how historically we've done business in this country.' Under the agreement, Nvidia will share 15 percent of its revenue from H20 chip sales to China, while AMD will share the same portion of its MI308 chip sales. Both the Nvidia and AMD chips in question, which are graphics processing units (GPUs) designed for the Chinese market with U.S. export controls in mind, faced new restrictions from the Trump administration in April, effectively blocking sales to China. Last month, Nvidia and AMD said the U.S. government had assured them it would begin approving export licenses for the H20 and MI308 chips, although the Commerce Department reportedly did not start issuing licenses for several weeks. The new revenue-sharing agreement comes after Nvidia CEO Jensen Huang met with President Trump at the White House last week, according to Bloomberg. Huang has found himself in a tricky situation, balancing Washington and Beijing's interests as both countries vie for AI dominance. 'We follow rules the U.S. government sets for our participation in worldwide markets,' an Nvidia spokesperson said in a statement. 'While we haven't shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide.' 'America cannot repeat 5G and lose telecommunication leadership,' they added. 'America's AI tech stack can be the world's standard if we race.' Nvidia dominates the market for GPUs, the chips powering the AI boom, fueling the company's rapid growth over the past few years. It became the first company in the world to reach a market capitalization of $4 trillion last month. AMD holds a much smaller share of the market, although it remains a key player. The agreement appears to remove a major impediment for both companies. Nvidia said earlier this year it incurred $4.5 billion in charges associated with the chip restrictions in the first quarter and expected an $8 billion sales hit in the second quarter. AMD forecast a $1.5 billion hit to revenue this year. The deal represents a notable shift in how the government approaches export controls. 'It's quite extraordinary because it turns the export control function of the government into a money-raising proposition, and that's never happened before,' Hufbauer said. The U.S. government is barred from imposing taxes on exports under both the Constitution and federal law. 'In addition to the policy problems with just charging Nvidia and AMD a 15% share of revenues to sell advanced chips in China, the US Constitution flatly forbids export taxes,' Peter Harrell, a nonresident fellow at the Carnegie Endowment for International Peace, wrote in a post on X. 'In addition to the Constitution, 50 USC 4815(c) expressly prohibits fees for export control licenses,' Harrell, who served as senior director of international economics in the Biden administration, added. It's unclear whether the 15 percent cut from Nvidia and AMD's revenues would count as an export tax because 'it looks like the companies just decided to make this payment in order to further their business,' Hufbauer noted. It's also not entirely clear who would have standing to challenge the move in court — an outcome Hufbauer suggested is ultimately unlikely. Even so, the agreements with Nvidia and AMD are likely to face pushback. The Trump administration's decision to allow Nvidia to resume H20 sales to China has already been a source of concern among both Democrats and Republicans, who have warned that it could boost Beijing's AI capabilities. Commerce Secretary Howard Lutnick has argued the administration is only giving China Nvidia's 'fourth best' chip. This represents an approach to export restrictions, largely supported by the semiconductor industry, that chipmakers should be allowed to sell some chips to China to prevent its national champion Huawei from gaining ground. However, the administration's latest move creates a new set of concerns. 'It raises concerns, certainly for many national security minded folks, of — are we now selling export control licenses? Is there a way that Nvidia will be able to buy licenses to sell more advanced chips than they're currently able to?' said Owen Tedford, a senior research analyst at Beacon Policy Advisors. Stacy Rasgon, a senior analyst at Bernstein Research, underscored that it makes sense for Nvidia and AMD to take a 15 percent cut because '85 percent is better than nothing.' However, he added, 'It feels like a little bit of a slippery slope. What's next? Where does it stop? Does it stop with China AI? Does it move to other China stuff that's under export control? In that case, sometimes there's a reason that there's export controls. Can you buy your way out of them? Strategically that's not great.' The deals could be a 'template' that other companies facing export controls try to follow, Tedford noted. 'It's somewhat unique in the way that they only would have happened with Trump as president,' he said. 'If we'd had a Biden or Harris administration and even if you'd had the same kind of on and off of these H20 chips, this really speaks to Trump's transactional nature, his desire to get some sort of win.' 'It raises questions about how — and I think this gets to some of more general concerns with the Trump administration — just policy feels like it's for sale in some ways, like policy outcomes,' Tedford added. 'If companies are big enough or strong enough, they can basically buy the policy that they want from the Trump administration.'
The Hill
07-07-2025
- Business
- The Hill
Canada's walk back of digital services tax boosts Big Tech, spells trouble for similar efforts
Canada's decision to rescind its digital services tax (DST) to restart trade negotiations with the U.S. represents a boon for major tech firms and could be a harbinger of what's to come for similar measures in other countries, experts told The Hill. The Canadian government announced late Sunday that it would scrap the tax on U.S. tech firms that was set to take effect Monday in a bid to bring the Trump administration back to the table and avoid heightened tariffs in the coming weeks. The move was successful for Ottawa, with the White House saying that trade talks would resume immediately. It was also cheered by the tech industry, which has lambasted digital services taxes as 'unfair' and 'discriminatory.' But experts say Canada's move could put pressure on other nations to follow suit and rescind their tech taxes. 'Going forward, I think the fact that Trump managed to bully or cajole Canada into dropping its [digital services tax] means that this will be a big item that he insists on in talks with Europe and any countries in all these trade negotiations,' said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics. 'I see this as a harbinger of a more general repeal of digital services taxes,' he added, calling it a 'pretty big deal and a real victory for Trump.' Since taking office for a second time, Trump has repeatedly criticized taxes and fines on U.S. tech firms. He slammed the European Union (EU) in January, alleging that the bloc's hefty fines against American companies amount to a 'form of taxation.' The EU's top court ruled in September that Apple owed more than $14 billion in back taxes to Ireland, while upholding a $2.7 billion fine against Google by European antitrust regulators. Meta, the parent company of Facebook and Instagram, was also fined about $840 million for antitrust violations in November. The social media giant was hit with another $228 million fine in April, alongside Apple, which faced a $570 million penalty. Trump railed against the EU during a meeting with the NATO secretary-general in March, calling the European bloc 'nasty' over the tech fines, as well as a tariff on U.S.-made cars. 'They're suing Google, they're suing Facebook, they're suing all of these companies, and they're taking billions of dollars out of American companies,' he said at the time. The president has also taken aim at digital services taxes in particular, signing an executive order in February slamming the taxes as 'designed to plunder American companies' and declaring that the U.S. would respond to such measures with tariffs or other actions. DSTs are taxes on tech companies from countries where their products are used. Canada sought to impose a 3 percent charge on revenues above $14.57 million, or 20 million Canadian dollars. Given the retroactive nature of the tax, companies were preparing to pay nearly $2 billion on Monday. The United Kingdom, France, Italy and numerous other countries have enacted similar tech taxes, with several others, like Germany, weighing their own. After Canada doubled down on its commitment to its digital services tax last week, Trump suspended trade talks and vowed to hit Ottawa with higher tariffs, calling the tax a 'direct and blatant attack on our Country.' 'Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,' he wrote on Truth Social. The Canadian government quickly backed down and stripped the tax, with Prime Minister Mark Carney emphasizing that his government 'will always be guided by the overall contribution of any possible agreement to the best interests of Canadian workers and businesses.' 'It's a big climb down by Canada,' Hufbauer said. 'I think was very sensible for them to do it because what's at stake and the ongoing trade talks is far larger than whatever Canada might collect on the [digital services tax].' Tech industry groups cheered the announcement. The Computer and Communications Industry Association (CCIA) called the move 'encouraging' and urged other governments to follow Canada's lead. The Information Technology and Innovation Foundation (ITIF) similarly suggested it was the 'right decision.' However, it could set a precedent, as the U.S. continues to negotiate with other countries ahead of a July 9 deadline when Trump's 90-day pause on most reciprocal tariffs is set to expire. 'Canada doesn't want to die on this hill, so they're going to move past it, and I think it's a positive relative to getting some sort of deal framework done,' Wedbush Securities analyst Dan Ives told The Hill. 'But it also sets a blueprint for others that head down the path with the U.S.' 'Canada conceding that they're going to have to move away from this, it opens up a pandora's box, especially with the EU,' he added. The Trump administration could take aim at Europe with Section 301 tariffs, which are import taxes used to target countries considered to be engaged in unfair trading practices, noted Daniel Bunn, president and CEO of the Tax Foundation. 'There are findings from the first Trump administration and a specific executive order on digital services taxes that could lead to Section 301 retaliatory tariffs any day really,' Bunn said. 'Those findings already exist. They've already checked the box on the procedure there. So, if they are interested in building momentum, then they have the opportunity to do so.' Trump already appears to have his eye on the EU, suggesting Friday that Canada was 'obviously copying' the bloc with its digital services tax and that the issue 'is currently under discussion.' The EU itself does not impose such a tax, even though some of its members do. It has passed two key tech laws, the Digital Services Act (DSA) and Digital Markets Act (DMA), which have been responsible for several large fines against U.S. tech firms. A draft agreement obtained by The Wall Street Journal last month suggested the U.S. would engage in talks with the European bloc on the DMA, pausing enforcement on American companies in the meantime. However, the European Commission — the EU's executive arm — has pushed back on the suggestion that either law is part of trade negotiations. 'Our legislation will not be changed,' Commission spokesperson Thomas Regnier said, according to Reuters. 'The DMA and the DSA are not on the table in the trade negotiations with the U.S.' While Hufbauer seemed skeptical of Trump's ability or desire to push for the repeal of the two tech laws, he suggested the UK and potentially the EU could be pressured into pulling back on their DSTs. Others are less convinced about the ripple effects of Canada's decision. Edward Alden, a senior fellow at the Council on Foreign Relations, emphasized that Ottawa is in a 'uniquely vulnerable situation.' 'The Europeans are in a much stronger position,' Alden said. 'They have a market that's collectively roughly the size of the U.S. market. Their retaliation has some significant effects on U.S. companies.' 'The Canadians are just in a much weaker position because 75 percent of their exports go to the United States,' he continued. 'So I think this was a decision by the Carney government in Canada that it couldn't be out in front in this particular battle with the United States.' However, he also noted that he 'would not be surprised' if the Europeans were willing to negotiate away their digital services taxes as part of a broader deal. Canada's decision could also empower tech companies to push back on the taxes, Alden added. 'Rather than seeing [Trump's] trade policies as disruptive, which they obviously are in certain ways, [they are] seeing them as a potential tool to tackle some foreign practices they dislike,' he said. 'So, I think this will embolden the tech companies to continue pressuring other countries that have implemented or are considering implementing similar measures.'
The Herald Scotland
09-05-2025
- Business
- The Herald Scotland
Trump announces US-UK trade deal. What does it mean for you?
"This is now turning out to be, really, a great deal for both countries," Trump said in the statement. But for the average U.S. consumer worried tariffs will increase household prices, economists said the deal itself isn't likely to offer much relief. The U.S. has a $12 billion trade surplus with the United Kingdom, meaning it already exports more than it imports. Meanwhile, the baseline 10% tariff Trump announced April 2 will remain in effect for most U.K. imports, which could lead to higher prices for consumers. The silver lining for inflation-weary consumers, according to Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics? This agreement could signal more trade deals on the horizon. "For the average consumer, (the U.K. agreement) won't be a big deal in itself," he said. "But it could be a big deal because it signals a reversal of Trump's extreme tariff agenda." How much does the US trade with the UK? Despite being a major historical ally and trading partner, the United Kingdom ranks behind several countries in its share of U.S. international trade. The countries Trump recently targeted with sweeping tariffs -- China, Canada and Mexico -- are the United States' largest trading partners, providing nearly half of the foreign goods consumed in the U.S., according to a USA TODAY analysis of Census trade data. Americans consumed $68 billion worth of goods produced in the United Kingdom in 2024, accounting for 2% of total U.S. imports from the world. At the same time, the U.S. shipped nearly $80 billion in products to the U.K., which is about 4% of total American exports worldwide. According to a USA TODAY analysis of 2024 trade data, the top imported goods from the U.K. included cars and aircraft worth $14 billion, followed by machinery at about $13 billion and miscellaneous goods such as surgical devices, musical instruments and antiques totaling $12 billion. Major U.S. exports to the U.K. included almost $15 billion in fuel, $13 billion in precious stones and jewelry, and $12 billion in aircraft and auto parts. Top 5 U.S. imports from the U.K. in 2024: Transportation equipment (vehicles, aircraft, auto parts) - $14.2 billion Machinery - $12.9 billion Miscellaneous goods (medical equipment, musical instruments, arts and antiques) - $12.3 billion Chemicals (pharmaceuticals, fertilizers, cosmetics) - $12 billion Electronics & electrical machinery - $3.6 billion Top 5 U.S. exports to the U.K. in 2024: Fuel (oil, gas) - $14.7 billion Stone & glass (precious stones, jewelry) - $13.3 billion Transportation equipment - $12 billion Miscellaneous goods - $9.4 billion Chemicals - $9.2 billion Which industries benefit from this agreement? Certain U.K. luxury automakers will benefit from the agreement, which cuts the 25% auto import tariff to 10% for the first 100,000 vehicles imported into the U.S. each year. Trump said he made the exception to help high-end U.K. vehicles from brands like Rolls-Royce, Bentley and Jaguar, calling them "special" cars that are produced in limited quantities. A news release said the U.K. will also be exempt from 25% steel and aluminum tariffs. Hufbauer said the change could help combat price increases among products from U.S. industries that use imported metal, such as construction, auto manufacturers and home appliances, although the U.S. imports a far larger share of steel from other countries. Canada, Brazil, Mexico, South Korea and Vietnam supplied nearly two-thirds of steel mill product imports in 2024, according to the American Iron and Steel Institute, a trade association. Trade talks could also help keep pharmaceutical prices lower, according to Hufbauer. Chemicals - which includes pharmaceuticals - accounted for more than 17% of the U.K.'s exports to the U.S. in 2024. Trump has promised "a major tariff on pharmaceuticals." A news release from the United Kingdom's government said "work will continue on the remaining sectors - such as pharmaceuticals and remaining reciprocal tariffs." Most imports from the U.K., though, will still get hit with a 10% tariff. Consumers "got relief by not getting hit by further increases in tariffs," said Desmond Lachman, senior fellow at the American Enterprise Institute, a conservative think tank. Still, "there are going to be a whole lot of goods coming from the U.K. that are going to cost 10% more." Are more trade deals on the horizon? Lachman said the U.K. agreement could signal "bigger" deals on the horizon, such as talks with China. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer are set to meet China's top economic official in Switzerland this week, a potential step toward de-escalating the trade war. "That's the one that's key for the United States if you're worried about the consumer," Lachman said. "If they don't get a deal with those people, a lot of the retails are warning that there's going to be empty shelves, there's going to be higher prices." China, which faces 145% tariffs on most goods, sent $438.9 billion worth of goods to the U.S. in 2024 compared to the U.K.'s $68 billion, according to Census Bureau data. Long term, some economists worry the back-and-forth on tariffs could strain relationships between the U.S. and its trading partners. "Trust is needed for any transaction. If you lose that, people will invest less. They'll want to trade less," said Peter Debaere, an international economist and professor at the University of Virginia's Darden School of Business. "These are effects you will not see right away, but they are much more serious."
