{"id":150900,"date":"2025-08-16T16:14:11","date_gmt":"2025-08-16T16:14:11","guid":{"rendered":"https:\/\/www.europesays.com\/us\/150900\/"},"modified":"2025-08-16T16:14:11","modified_gmt":"2025-08-16T16:14:11","slug":"trumps-unprecedented-potentially-unconstitutional-deal-with-nvidia-and-amd-explained-alexander-hamilton-would-approve","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/150900\/","title":{"rendered":"Trump’s unprecedented, potentially unconstitutional deal with Nvidia and AMD, explained: Alexander Hamilton would approve"},"content":{"rendered":"

\u201cWe negotiated a little deal,\u201d President Donald Trump told reporters<\/a> on August 11, about the developing situation with leading chip makers Nvidia<\/a> and AMD continuing to do business in China. He explained that he originally wanted a 20% cut of Nvidia\u2019s sales in exchange for the company obtaining export licenses to sell H20 chip to China, but he was persuaded to settle at 15%. The H20 chip is \u201cobsolete,\u201d Trump added \u2026 \u201che\u2019s selling a essentially old chip.\u201d<\/p>\n

The chips do appear to be quite significant to China, considering that the Cyberspace Administration of China held discussions with Nvidia<\/a>\u00a0over security concerns that the H20 chips may be tracked and turned off remotely, according to a disclosure on its website. The deal, which lifted an export ban on Nvidia\u2019s H20 AI chips and AMD\u2019s MI308, and followed heated negotiations, was widely described as unusual and also still theoretical at this point, with the legal details still being ironed out by the Department of Commerce. Legal experts have questioned whether the eventual deal would constitute an unconstitutional export tax<\/a>, as the U.S. Constitution prohibits duties on exports. This has come to be known as the \u201cexport clause\u201d of the constitution.<\/p>\n

Indeed, it\u2019s hard to find much precedent for it anywhere in the history of the U.S. government\u2019s dealings with the corporate sector. Erik Jensen, a law professor at Case Western Reserve University who has studied the history of the export clause, told Fortune he was not aware of anything like this in history. In the 1990s, he added, the Supreme Court struck down two attempted taxes on export clause grounds (cases known as IBM and U.S. Shoe<\/a>). Jensen said tax practitioners were surprised that the court took up the cases: \u201cif only because most pay no attention to constitutional limitations, and the Court hadn\u2019t heard any export clause cases in about 70 years.\u201d The takeaway was clear, Jensen said: \u201cThe export clause matters.\u201d<\/p>\n

Columbia University professor Eric Talley agreed with Jensen, telling Fortune that while the federal government has previously applied\u00a0subsidies\u00a0to exports, he\u2019s not aware of other historical cases imposing taxes on selected exporters. Talley also cited the export clause as the usual grounds for finding such arrangements unconstitutional. <\/p>\n

Rather than downplaying the uniqueness of the arrangement, Treasury Secretary Scott Bessent has been leaning into it. In a Bloomberg television interview, he said: \u201cI think you know, right now, this is unique. But now that we have the model and the beta test, why not expand it? I think we could see it in other industries over time.\u201d<\/p>\n

Bessent and the White House insist there are \u201cno national security concerns,\u201d since only less-advanced chips are being sold to China. Instead, officials have touted the deal as a creative solution to balance trade, technology, and national policy.<\/p>\n

How rare is this?<\/p>\n

The arrangement has drawn sharp reaction from business leaders, legal experts, and trade analysts. Julia Powles, director of UCLA\u2019s Institute for Technology, Law & Policy, told the Los Angeles Times<\/a>: \u201cIt ties the fate of this chip manufacturer in a very particular way to this administration, which is quite rare.\u201d Experts warned that if replicated, this template could pressure other firms\u2014not just tech giants\u2014into similar arrangements with the government. Already, several unprecedented arrangements have been struck between the Trump administration and the corporate sector, ranging from the \u201cgolden share<\/a>\u201d in U.S. Steel negotiated as part of its takeover by Japan\u2019s Nippon Steel to the federal government reportedly discussing buying a stake in chipmaker Intel<\/a>.<\/p>\n

Nvidia and AMD have declined to comment on specifics. When contacted by Fortune for comment, Nvidia reiterated its statement that it follows rules the U.S. government sets for its participation in worldwide markets. \u201cWhile we haven\u2019t shipped H20 to China for months, we hope export control\u00a0rules will let America compete in China and worldwide. America cannot repeat 5G and lose telecommunication leadership. America\u2019s AI tech stack can be the world\u2019s standard if we race.\u201d<\/p>\n

The White House declined to comment about the potential deal. AMD did not respond to a request for comment.<\/p>\n

While Washington has often intervened in business\u2014especially in times of crisis\u2014the mechanism and magnitude of the Nvidia\/AMD deal are virtually unprecedented in recent history. The federal government appears to have never previously claimed a percentage of corporate revenue from export sales as a precondition for market access. Instead, previous actions took the form of temporary nationalization, regulatory control, subsidies, or bailouts\u2014often during war or economic emergency. Examples of this include the seizure of coal mines (1946) and steel mills (1952) during labor strikes, as well as the 2008 financial crisis bailouts, where the government took equity stakes in large corporations including two of Detroit\u2019s Big three<\/a> and most of Wall Street\u2019s key banks<\/a>. During World War I, the War Industries Board regulated prices, production, and business conduct for the war effort.<\/p>\n

Congress has previously created export incentives and tax-deferral strategies (such as the Domestic International Sales Corporation and Foreign Sales Corporation Acts), but these measures incentivized sales rather than directly diverting a fixed share of export revenue to the government. Legal scholars stress that such arrangements were subjected to global trade rules and later modified after international complaints.<\/p>\n

Global lack of precedent<\/p>\n

The U.S. prohibition on export taxes dates back to the birth of the nation. Case Western\u2019s Jensen has written<\/a> that some delegates of the Constitutional Convention<\/a> of 1787, such as New York\u2019s Alexander Hamilton, were in favor of the government being able to tax revenue sources such as imports and exports, but the \u201cstaple states\u201d in the southern U.S. were fiercely opposed, given their agricultural bent, especially the importance of cotton at that point. <\/p>\n

Still, many other countries currently have export taxes on the books, though they are generally imposed across all exporters, rather than as one-off arrangements that remove barriers to a specific market. And many of the nations with export taxes are developing countries who tax agricultural or resource commodities. In several cases (Uganda, Malaya, Sudan, Nigeria, Haiti, Thailand),\u00a0export taxes made up 10% to 40% of total government tax revenue\u00a0in the 1960s and 1970s, according to an IMF staff paper<\/a>.<\/p>\n

Globally, most countries tax profits generated within their borders (\u201csource-based corporate taxes\u201d), but rarely as a\u00a0direct percentage of export sales as a market access precondition. The standard model is taxation of locally earned profits, regardless of export destination; licensing fees and tariffs may be applied, but not usually as a fixed percent of export revenue as a pre-negotiated entry fee.<\/p>\n

Although the Nvidia\/AMD deal doesn\u2019t take the usual form of a tax, Case Western\u2019s Jensen added. \u201cI don\u2019t see what else it could be characterized as.\u201d It\u2019s clearly not a \u201cuser fee,\u201d which he said is the usual triable issue of law in export clause cases. For instance, if goods or services are being provided\u00a0by the government in exchange for the charge, such as docking fees at a governmentally\u00a0operated port, then that charge isn\u2019t a tax or duty and the Export Clause is irrelevant.\u00a0\u201cI just don\u2019t see how the charges that will be levied in the chip cases could possibly be characterized in that way.\u201d<\/p>\n

Players have been known to \u201cgame\u201d the different legal treatments of subsidies and taxes, Columbia\u2019s Talley added. He cited the example of a government imposing a uniform, across-the-board tax on all producers, but then providing a subsidy to sellers who sell to domestic markets. \u201cThe net effect would be the same as a tax on exports, but indirectly.\u201d He was unaware of this happening in the U.S. but cited several international examples including Argentina, India, and even the EU.<\/p>\n

One famous example of a canny international tax strategy was Apple\u2019s domicile in Ireland, along with so many other multinationals keeping their international profits offshore in affiliates in order to avoid paying U.S. tax, which at the time applied to all worldwide income upon repatriation. Talley said much of this went away after the 2018 tax reforms, which moved the U.S. away from a worldwide corporate tax, with some exceptions.<\/p>\n

The protection racket comparison<\/p>\n

If Trump\u2019s chip export tax is an anomaly in the annals of U.S. international trade, the deal structure has some parallels in another corner of the business world: organized crime, where \u201cprotection rackets\u201d have a long history. Businesses bound by such deals must pay a cut of their revenues to a criminal organization (or parallel government), effectively as the cost for being allowed to operate or to avoid harm.<\/p>\n

The China chip export tax and the protection rackets extract revenue as a\u00a0condition for market access, use the threat of exclusion or punishment for non-payment, and both may be justified as \u201cprotection\u201d or \u201cguaranteed access,\u201d but are not freely negotiated by the business.<\/p>\n

\u201cIt certainly has the smell of a governmental shakedown in certain respects,\u201d Columbia\u2019s Talley told Fortune, considering that the \u201cunderlying threat was an outright export ban, which makes a 15% surcharge seem palatable by comparison.\u201d<\/p>\n

Talley noted some nuances, such as the generally established broad statutory and constitutional support for national-security-based export bans on various goods and services sold to enumerated countries, which have been imposed with legal authority on China, North Korea, Iraq, Russia, Cuba, and others. \u201cFrom an economic perspective, a ban on an exported good is tantamount to a tax of \u2018infinity percent\u2019 on the good,\u201d Talley said, meaning it effectively shuts down the export market for that good. \u201cViewed in that light, a 15% levy is less (and not more) extreme than a ban.\u201d<\/p>\n

Still, there\u2019s the matter, similar to Trump\u2019s tariff regime, of making a legal challenge to an ostensibly blatantly illegal policy actually hold up in court. \u201cA serious question with the chips tax,\u201d Case Western\u2019s Jensen told Fortune, \u201cis who, if anyone, would have standing to challenge the tax?\u201d In other words, it may be unconstitutional, but who\u2019s actually going to compel the federal government to obey the constitution?<\/p>\n","protected":false},"excerpt":{"rendered":"\u201cWe negotiated a little deal,\u201d President Donald Trump told reporters on August 11, about the developing situation with…\n","protected":false},"author":3,"featured_media":150901,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[229,64,74,32328,69,2010,1671,1593,67,132,68],"class_list":{"0":"post-150900","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-advanced-micro-devices","9":"tag-business","10":"tag-china","11":"tag-constitution","12":"tag-donald-trump","13":"tag-jensen-huang","14":"tag-nvidia","15":"tag-semiconductors","16":"tag-united-states","17":"tag-unitedstates","18":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115039336087652480","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/150900","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=150900"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/150900\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/150901"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=150900"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=150900"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=150900"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}