Trump's new tariffs hit US chipmakers selling to China
In a startling turn for US-China technology relations, the Trump administration has introduced an unprecedented levy, requiring American semiconductor giants Nvidia and Advanced Micro Devices (AMD) to pay a 15% share of their revenues from certain advanced chip sales to China. This highly unusual arrangement, revealed as export licenses are granted for previously restricted AI-focused chips, marks a significant departure from traditional trade policy, where tariffs typically target foreign goods or outright bans are imposed for national security.
For years, the United States has tightened export controls on cutting-edge chips, citing national security concerns over their potential use in China’s military modernization and artificial intelligence development. This led to bans on high-performance chips like Nvidia’s A100 and H100, prompting companies to design downgraded versions such as Nvidia’s H20 and AMD’s MI308 specifically for the Chinese market. However, even these tailored chips faced restrictions, with the Trump administration halting H20 sales in April 2025.
Now, in a dramatic reversal, the Commerce Department has reportedly begun issuing export licenses for these chips, but with the novel condition of a 15% revenue share for the US government. This “quid pro quo” arrangement, first reported by the Financial Times, allows Nvidia to sell its H20 chips and AMD its MI308 chips into the crucial Chinese market, a move that analysts suggest could be linked to China’s recent easing of rare earth export restrictions.
This policy shift aligns with President Trump’s transactional approach to trade, where he has historically sought financial concessions or domestic investments in exchange for easing trade restrictions. However, the nature of this particular deal has ignited a firestorm of criticism from legal and trade experts. Many question its constitutional validity, arguing that the US Constitution flatly forbids export taxes. Former officials have described the agreement as “unprecedented and dangerous,” blurring the lines between national security policy and a revenue-generating mechanism.
For Nvidia and AMD, this arrangement offers a pathway to recoup substantial losses incurred from previous bans. Nvidia alone cited a $10.5 billion revenue hit in the first half of 2025 due to China sales restrictions, while AMD reported missing out on $800 million last quarter. Should sales return to prior levels, the US government stands to collect hundreds of millions of dollars quarterly. Yet, the deal sends mixed signals to the broader tech industry, which has faced mounting pressure to decouple from China amidst escalating trade tensions and a significant decline in US company investments in the region.
The implications extend beyond the immediate financial impact. This “political tariff,” as some have termed it, could set a new and controversial precedent for how Washington manages technology exports to strategic rivals, potentially influencing other critical sectors like quantum computing and telecommunications. While proponents might argue it provides a means to allow some trade while extracting a “toll,” opponents warn of selling away national security concerns and creating an uneven playing field for American companies globally. As the US-China trade truce approaches its August 12 deadline, this unique revenue-sharing model underscores the unpredictable and evolving landscape of global tech trade.