Latest news with #exporttax
Forbes
4 days ago
- Business
- Forbes
The Trouble With Trump's Deal With Nvidia And AMD: Its An Export Tax
Two of the nation's most prominent chipmakers have agreed to pay the US government 15 percent of their revenues from the sale of artificial intelligence chips to China. In effect, the firms will be paying an export tax, though neither they nor the administration describe it this way. One reason why: Such a levy appears to be unconstitutional. Whatever it is called, this arrangement may prove bad for the economy, for national security, and even for many of the president's own priorities. The Backstory In April, the Administration banned sales to China of Nvidia's H20 chip and Advanced Micro Devices' (AMD) MI301 chip. While these are not the most sophisticated AI chips the companies make, they are advanced enough that national security experts raised concerns about US firms selling them to China. In July, the Administration reversed course and announced it would approve the sales but delayed issuing the necessary export licenses. On August 6, Nvidia's CEO and President Trump agreed to the 15 percent payment. Two days later, the Commerce Department approved the licenses. At an August 11 news conference, Trump recounted his talks with the corporate leader: 'I said, 'If I'm going to do that, I want you to pay us something. So I said, 'Listen, I want 20 percent if I'm going to approve this for you, for the country.'' Trump eventually agreed to a 15 percent payment. Conflicting Goals As with Trump's import taxes, these export levies come as he tries to achieve multiple, conflicting goals. He wants: A Constitutional Problem Like Trump's recent tariff agreements with Japan and European Union, few details accompanied this arrangement. How exactly will it be structured? What guardrails will be put in place to limit avoidance and evasion? Neither the companies nor the Administration is calling this a tax, for at least two possible reasons. First, raising taxes on US businesses is a bad look for an Administration that wants to be seen as cutting corporate taxes. Second, and perhaps most important, export taxes are explicitly prohibited by the US Constitution. Article I says, 'No Tax or Duty shall be laid on Articles exported from any State.' Trump and the firms may be trying to avoid that ban by implying the payments are voluntary. But if the firms could not get export licenses without agreeing to the payments, their optionality is questionable. Problems With An Export Tax Developing countries often impose export taxes on low-value goods, such as agricultural products. But they create well-known problems. Export taxes are economically inefficient since they encourage firms to produce and sell goods not subject to the export levy. Understanding the impact of these levies is challenging because Trump is imposing them in a complex policy environment for chipmakers, filled with carrots and sticks. President Biden curbed semiconductor sales to China. During his Administration, Congress also passed the CHIPS Act that provided $52 billion in subsidies and tax credits for chips made in the US. Trump has vowed to repeal that law. However, the just-passed 2025 budget bill that he backed includes new and expanded subsidies for US chipmakers. Trump also threatened to withhold CHIPS Act subsidies and impose 100 percent tariffs on imports of certain chips, then backed off when manufacturers promised to produce more semiconductors in the US. Trump has made no secret of his desire to greatly expand government's ability and his personal authority to manage investment decisions normally made by business. This goes well beyond broad policy initiatives to encourage domestic manufacturing. For example, the Administration reportedly is considering acquiring a stake in another chipmaker, Intel and Trump says he'll personally control a share of foreign investment in the US. The export tax will be difficult to collect. Chip smuggling already is a serious problem. This tax is likely to increase the practice. And without guardrails, what will prevent US producers from selling to a middleman who can resell to China? For example, firms avoided paying 2018 tariffs on goods from China by first shipping them to Vietnam and then to the US. The same can happen in reverse with export taxes. The levy will create additional incentives for China to find other markets or, more likely, produce domestic versions of AI chips. The Administration seems inclined to frame its arrangement with Nvidia and AMD as the US becoming a sort-of business partner with private companies. But that won't avoid other problems. The government would share upside profit with no downside risk, an unusual business relationship at best. It could make policy decisions that benefit its partner, perhaps to the detriment of competitors. And it could attempt to influence business decisions, a practice unlikely to result in the most efficient use of a firm's capital. Finally, levies such as this create serious potential for corruption. If government can pick and choose what products and what producers are subject to an export tax, there is nothing to prevent a firm from using political influence to gain an exception that is unavailable to its competitors. This export tax by any name is a poor idea. It will generate relatively little revenue, fail to protect US security interests, and ultimately make US chipmakers less competitive in world markets.
Gizmodo
11-08-2025
- Business
- Gizmodo
Pay-to-Play? Trump Slaps 15% 'Export Tax' on Big Tech's China AI Chips
Nvidia and AMD have reportedly agreed to pay the U.S. government a 15% cut of their revenue from their specialized chip sales in China, in a deal so unconventional the business world is still reeling. The arrangement, effectively a new kind of 'export tax,' is an unprecedented move that ends a months-long blockade and reopens one of the world's largest markets for America's two most valuable chipmakers. The news, first reported by the Financial Times, reveals the original and transactional tactics the Trump administration is deploying to generate revenue and control the flow of strategic technology. Nvidia and AMD chips are highly sought after by companies and governments to train their AI tools in the current AI race. For Nvidia and AMD, agreeing to pay the government a portion of their profits was the lesser of two evils. Being completely locked out of the Chinese market was a financial catastrophe. Nvidia had been hit particularly hard. After the administration blocked its China-specific chips in April, the company was forced to take a $4.5 billion charge for excess inventory it could no longer sell. In May, it warned investors that the restrictions would cost the company an estimated $8 billion in revenue for the full fiscal year. Faced with losing billions, handing over 15% of future sales was a price they were willing to pay. The standoff is the latest chapter in the long-running U.S.-China tech war. The U.S. government has been trying to slow Beijing's military advancement by blocking its access to high-end AI chips. After the previous administration banned the sale of their most powerful processors, Nvidia and AMD cleverly designed special, less-powerful 'compliance chips' — like Nvidia's H2O and AMD's MI308 — specifically for the Chinese market. But in April, the Trump administration tightened the screws, requiring a special license to sell even these less powerful chips. That move triggered months of intense, high-stakes lobbying, marked by several White House visits from Nvidia CEO Jensen Huang, which ultimately led to this new arrangement. For the Trump administration, the deal is a win on multiple fronts. It provides a new stream of federal revenue that could help finance the massive tax cuts in the 'One Big Beautiful Bill,' the president's signature legislation. It also allows the administration to look tough on China while simultaneously protecting the financial health of critical American companies. In a carefully worded statement to Gizmodo, an Nvidia spokesperson avoided confirming the 15% figure but acknowledged the new reality. 'We follow rules the U.S. government sets for our participation in worldwide markets,' it reads. 'While we haven't shipped H2O to China for months, we hope export control rules will let America compete in China and worldwide.' The spokesperson added: 'America cannot repeat 5G and lose telecommunications leadership. America's AI tech stack can be the world's standard if we race.' This new deal is a radical departure from traditional trade policy. Governments typically encourage and subsidize exports from their national champions to boost trade balances. This new model, however, forces America's most successful companies to pay for the privilege of competing abroad. It's a pragmatic compromise that gives Nvidia a path to reclaim its dominant market position and potentially push its market value past the unprecedented $5 trillion threshold. But it also sets a startling precedent for how the U.S. government could exert control over its most strategic industries in the future. AMD did not immediately respond to a request for comment.
Bloomberg
22-07-2025
- Business
- Bloomberg
Ontario Premier Says Electricity Export Tax Is Possible If Trade Talks Fail
Ontario Premier Doug Ford said he hasn't ruled out the idea of reimposing a surcharge on electricity exports to US states if trade talks between Canada and the Trump administration don't result in a fair deal. In March, the leader of Canada's most populous province briefly put a 25% export tax on power exports to Michigan, Minnesota and New York in retaliation for US President Donald Trump's trade war. He backed down after the president said he would increase tariffs on Canadian steel and aluminum to 50% and attack the country's auto industry, which relies on exports to the US.
Zawya
08-07-2025
- Business
- Zawya
South Africa: Govt's proposed chrome export tax threatens jobs
South Africa's proposed chrome ore export tax will hurt miners' profitability and lead to job losses across the sector, the country's Minerals Council has said. Africa's most advanced economy is the world's biggest exporter of chrome, which is mostly used in the manufacture of stainless steel. South Africa also used to be the biggest global producer of ferrochrome, a combination of chrome and iron, but lost that pole position to China, mostly due to high electricity costs which have forced many smelters to shut. On June 26 2025, South Africa's cabinet announced it had agreed to lower power tariffs for chrome smelters as well as a proposal to impose a tax on chrome ore exports as part of efforts to stop the decline of the ferrochrome industry. The Minerals Council South Africa (MCSA), which represents the country's biggest miners, said in a statement that the tax "would not achieve the government's aims of sustaining the ferrochrome industry and the preservation of jobs". It would instead "hurt chrome producers and the significant contribution this industry makes to both South Africa's economy and the jobs it sustains and grows". South Africa's chrome sector directly employs 25,000 people and earned the country R85bn ($4.85 billion) in export revenue in 2024, according to the Minerals Council. It exported a record 20.5 million metric tons of chrome concentrate in 2024, mostly to China, the world's biggest importer of the commodity. Companies mining and processing chrome in South Africa include Glencore, Tharisa Plc and South32.
Yahoo
05-07-2025
- Business
- Yahoo
South Africa's proposed chrome export tax could lead to job losses
The South African mining industry is facing a potential challenge as the government's proposed chrome ore export tax could negatively affect miners' profitability and lead to job losses, according to a report by Reuters. The Minerals Council South Africa, representing the country's major miners, has expressed concerns that the tax will not support the government's goals of preserving the ferrochrome industry and jobs. South Africa, the world's largest exporter of chrome, has seen its ferrochrome production decline, losing its leading position to China, primarily due to high electricity costs. This has resulted in many smelters shutting down operations. To address this, the South African cabinet announced on 26 June 2025 that it had agreed to lower power tariffs for chrome smelters and proposed a tax on chrome ore exports in a move to revitalise the ferrochrome industry. However, the Minerals Council believes that this move would 'have a negative impact on chrome producers and the significant contribution this industry makes to both South Africa's economy and the jobs it sustains and grows.' The chrome sector in South Africa is a significant employer, directly employing 25,000 people and generating R85bn ($4.85bn) in export revenue in 2024. The country exported a record 20.5 million tonnes (mt) of chrome concentrate in 2024, mainly to China. Companies such as Glencore, Tharisa and South32 are key players in the South African chrome mining and processing industry. South African coal and iron ore exporters, including Glencore and a unit of Anglo American, are preparing to sign investment agreements worth billions of rand with Transnet. These agreements, as stated by B4SA's head of transport and logistics Ian Bird, are to repair critical rail lines and enhance shipment capabilities. "South Africa's proposed chrome export tax could lead to job losses" was originally created and published by Mining Technology, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
