Background and Relevance of Key Players
The United States, under President Donald Trump’s administration, is reportedly planning to permit Nvidia and AMD to sell advanced semiconductors to China. This decision, which may be illegal, sends a clear message to the U.S.’s adversaries: national security concerns will be disregarded if it means securing a personal gain for the administration.
To understand the implications, consider Nvidia’s H20 chips. Trump described these as “old” and “obsolete,” yet Nvidia sold around a million of them in China by 2024, which is about five times the amount sold by Huawei. This indicates that while not cutting-edge, these chips remain valuable for Chinese companies due to their compatibility with various hardware through Nvidia’s CUDA interface.
The relevance of these chips was further highlighted in January when Chinese company DeepSeek used them to develop a top-tier language model without the high cost associated with models from OpenAI, Anthropic, or Google. Thus, allowing their export harms rather than benefits U.S. interests in the ongoing AI competition with China.
China’s Growing Access to AI Components
Despite China’s growing access to most other components needed for AI development, such as top scientific talent, abundant data, energy, and a near-monopoly on rare earth minerals used in AI “stacks,” the market share gap between Nvidia and Huawei suggests that access to advanced chips, including H20, remains a significant vulnerability.
In early 2021, RAND Corporation identified export controls on chips as the most powerful lever in shaping China’s AI development. This explains the Trump administration’s April decision to impose a new licensing requirement for H20 chips with a presumption of denial. However, the White House has now relinquished this advantage without securing any concessions from companies or Chinese authorities.
U.S. Dependence on China for Critical Minerals
The U.S. heavily relies on China for 70% of the world’s rare earth minerals, crucial for many digital tools. The lack of resolution in U.S. military supply chains, which could have been addressed through an agreement, persists. Critical components like heat-resistant magnets for missiles, fighter jets, and smart bombs remain dangerously scarce. At a time of increasing military investments in the Indo-Pacific region that require these tools, U.S. trade policy seems to be undermining its security strategy.
Motivations Behind the Nvidia-AMD Agreement
The export agreement between Nvidia and AMD is, therefore, an unnecessary mistake. The question remains: what motivated this decision?
The President’s authority to control the export of dual-use items—goods with both civilian and military applications, like advanced semiconductors—stems from the Export Administration Reform Act of 2018. The government can demand “licenses” for certain exports and impose conditions or restrictions on these licenses.
The government might argue that the 15% tax is a “condition.” However, the 2018 law explicitly lists examples of conditions, all relating to how and by whom technology can be used or shared. This implies that Congress did not grant the President the power to impose taxes through this law. Just as the International Emergency Economic Powers Act of 1977 cannot be fairly interpreted as a secret power to tax imports (as Trump’s tariffs do), the Export Administration Reform Act does not create a secret power to tax exports.
Parallels with TikTok Case
Comparing the Nvidia-AMD agreement to other administration policies reveals patterns. The closest parallel might be the treatment of social media platform TikTok.
Trump attempted to ban TikTok during his first term due to national security concerns but later assumed office under a legal mandate that prohibited it unless its Chinese owners divested. In January 2025, the Supreme Court upheld the ban, which Trump postponed. The statute allowed for a single 90-day extension, but only with a buyer in sight. Having surpassed this deadline, Trump simply refused to enforce a valid law aligning with his previous stance on national security.
In both the TikTok case and the Nvidia-AMD agreement, Trump violated federal law by permitting transactions with Chinese entities, which his own administration previously described as posing serious security concerns. In both instances, this was done without negotiation or agreement to achieve a public policy goal.
Political Gains Over National Security
Trump’s motives in the TikTok case were clear: he believed TikTok helped him win over young voters in the 2024 election. National security considerations gave way to electoral advantage. Similarly, the Nvidia-AMD agreement offers political benefits: a recent Congressional Budget Office estimate suggests Trump’s budget will increase the national deficit by $4.1 trillion. Squeezing money from tech companies can be presented as a political victory and deficit offset, despite the insignificant revenue.
Moreover, since there’s no law mandating revenue from export controls, there are no legal restrictions on how the government uses this money. Trump could, for instance, use it for a new White House ballroom or build more “Alcatraz-style” detention facilities for undocumented immigrants.
Key Questions and Answers
- What is the main issue with the U.S. plan to allow Nvidia and AMD to sell advanced semiconductors to China? The primary concern is that it disregards U.S. national security interests, potentially weakening the country’s position in the AI race against China and undermining military supply chains reliant on rare earth minerals.
- Why are Nvidia’s H20 chips significant? Despite being described as “obsolete,” these chips are still valuable for Chinese companies due to their compatibility with various hardware and their use in developing high-performing AI models.
- What does China’s near-monopoly on rare earth minerals signify for U.S. security? It implies a significant vulnerability, as these minerals are crucial for many digital tools in U.S. military technology.
- How did the Trump administration violate federal law? By permitting transactions with Chinese entities, such as the Nvidia-AMD agreement and TikTok case, without securing necessary concessions or negotiating for public policy goals.
- What are the potential political gains from this decision? The administration could present increasing revenue from tech companies as a political victory and deficit offset, despite the insignificant actual revenue.
The Author
Aziz Huq, a law professor at the University of Chicago and author of “The Collapse of Constitutional Remedies” (Oxford University Press, 2021), wrote this piece.
Copyright: Project Syndicate, 1995 – 2025
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