US Strikes an Unprecedented Deal Over Chip Sales to China

The Trump administration has struck a highly unconventional deal with two tech giants: It will allow them to sell chips to China in exchange for a 15% cut, reports the New York Times.

• The companies are Nvidia, which will ship an artificial intelligence chip called H20, and Advanced Micro Devices, which has the MI308 chip, per the Wall Street Journal. Prior to the deal, the US government had banned the sales to China.
• "We follow rules the US government sets for our participation in worldwide markets," Nvidia said in a statement Sunday. "While we haven't shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide." Nvidia CEO Jensen Huang met with President Trump last week.

• Big money: The resulting payments to the government could exceed $2 billion this year, as Nvidia's China sales alone might top $15 billion.
• Context: "It is unusual for companies to essentially pay for export licenses," per the Journal. "The agreements follow criticism from national-security hawks who fear the chips and other technology will boost China's AI ecosystem and military." The Times similarly observes that "there are few precedents for the Commerce Department agreeing to grant licenses for exports in exchange for a share of revenue. But the unorthodox payments are consistent with (President) Trump's increasingly interventionist role in international business deals involving American companies."
• New tax? A Bloomberg story suggests the deal amounts to the companies paying an export tax, and it quotes a skeptic. "To call this unusual or unprecedented would be a staggering understatement," Stephen Olson of Singapore's ISEAS–Yusof Ishak Institute. "What we are seeing is in effect the monetization of US trade policy in which US companies must pay the US government for permission to export. If that's the case, we've entered into a new and dangerous world."