Trump inaugurates a period of 'extortionist' economic system
In a surprising move, tech giants Nvidia and AMD have agreed to pay 15% of their revenues from semiconductor sales to China to the US government in exchange for export licenses [1][2][4][5]. This arrangement marks a new form of corporate tax, dictated by the president and directed to the Treasury, not to be appropriated by Congress.
Traditionally, U.S. export licenses have not involved any fees or required companies to share revenue with the government [1][4]. However, the 15% revenue-sharing deal was reportedly negotiated as a condition for granting the export licenses for AI chips (Nvidia's H20 and AMD's MI308) to be sold in China, after earlier export bans were put in place citing national security concerns [1][2][5].
The legality of this revenue-sharing deal raises serious constitutional questions, particularly concerning the U.S. Constitution's Export Clause (Article I, Section 9), which prohibits taxes or duties on exports from any state [2][3]. Legal experts argue that this government's taking a cut of export sales revenue qualifies as an export tax and thus likely violates the Export Clause. The Supreme Court has interpreted this clause broadly to forbid any direct tax burden on exports unless they are user fees—charges related to government services or benefits—which this 15% charge does not qualify as [3].
Despite its probable unconstitutionality, this export tax-like arrangement may persist because it is unlikely to be challenged in court soon [3]. This sets a potentially dangerous precedent for the executive branch to impose revenue-extracting "deals" on companies as conditions for export approval, bypassing legislative authorization and undermining separation of powers [3].
This move by the Trump administration, which has been known for its strategy of manufacturing crises that are later claimed to be fixed [6], could result in about $5 billion a year going into the Treasury coffers from these two companies alone [7]. The companies will now be able to resume selling chips in China, after Trump blocked all semiconductor sales to the country [8].
China made up 13% of Nvidia's sales in 2024 [9], making this deal a significant financial decision for both companies. The deal between Nvidia and AMD could be seen as a continuation of Trump's pay-to-play strategy [10], where financial commitments from countries are used as a way for them to "pay down" threatened tariff rates [11].
Daniel Alpert, managing partner of Westwood Capital, stated that Trump's strategy ticks many boxes, including national security, revenue, reshoring, and general industrial policy [12]. However, many investors have spoken out against the deal, calling it unconstitutional [2].
In conclusion, the U.S. government's demand for 15% revenue share from Nvidia and AMD sales to China is essentially a new form of export tax imposed as a licensing condition [1][2]. It is unprecedented and breaks with historical norms, as export licenses have not carried fees or revenue sharing before [1][4]. Legal experts warn it violates the Export Clause of the Constitution prohibiting export taxes, making it likely unconstitutional [2][3]. The arrangement may remain in effect for now, though it raises serious concerns about executive overreach and constitutional limits [3][4][5].
The U.S. government's new demand for a 15% revenue share from Nvidia and AMD sales to China marks a significant shift in business and finance, as well as a potential breach of constitutional laws. This arrangement, which resembles an export tax, is contrary to traditional export licenses that have not involved any fees or revenue sharing [1][4]. If this arrangement withstands legal challenges, it could set a dangerous precedent in politics and general news, as the executive branch might impose such revenue-extracting deals on other companies, possibly avoiding legislative authorization and undermining the separation of powers [3].
