KEY POINTS
- Nvidia and AMD have agreed to “voluntarily” pay the U.S. government a 15% cut of all revenue from their high-end AI chip sales in China in exchange for renewed export licenses.
- The deal represents an unprecedented and legally questionable arrangement that aims to balance national security with economic pragmatism, funneling billions of dollars directly into the U.S. Treasury without being classified as a tax or tariff.
- This new policy signals a shift in the administration’s strategy, allowing American tech giants to re-enter the lucrative Chinese market at a steep cost, while also giving the U.S. a powerful new bargaining chip in its ongoing trade talks with Beijing.
WASHINGTON – In an extraordinary and unprecedented maneuver, Nvidia, the world’s most valuable company, has found itself at the center of President Donald Trump’s historic trade war with China, resulting in a deal that will see the $4.5 trillion corporation give the United States government a 15% cut of all revenue from its high-end AI chip sales in the country.
The agreement, which fellow chipmaker AMD has also signed for some of its products, represents a stunning concession and a novel new tool in the administration’s economic arsenal. It attempts to split the difference between two of the White House’s competing goals: maintaining America’s technological dominance over its chief rival and securing a critical trade agreement with Beijing. The deal allows American tech giants to re-enter the lucrative Chinese market, but at a steep price, one that could funnel billions of dollars directly into the U.S. Treasury and fundamentally reshape the relationship between the government and the nation’s most strategic industries.
The Deal: A “Voluntary” Payment for Market Access
The agreement was born out of a high-stakes standoff that began in April, when the White House blocked the export of certain powerful AI chips to China, including Nvidia’s H20 and AMD’s MI308 chips, citing national security concerns. The move effectively cut off the companies from a market that accounted for 13% of Nvidia’s sales in 2024, costing them billions in lost revenue.
The new deal, finalized after a meeting between Nvidia CEO Jensen Huang and President Donald Trump on Wednesday, provides the companies with the necessary export licenses to restart sales of those chips. In exchange, Nvidia and AMD have agreed to “voluntarily” pay the U.S. government 15% of their revenues from these specific semiconductor sales to China. The president noted that the administration had initially asked for a 20% cut but negotiated the rate down to 15%.
“We follow rules the US government sets for our participation in worldwide markets,” a Nvidia spokesperson said in a statement. “While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide.”
An Unprecedented—and Legally Questionable—Arrangement
The nature of the deal is extraordinary, with few, if any, historical precedents. While governments have taken control of strategically important companies in the past—such as the U.S. government’s bailout and temporary ownership of General Motors and Chrysler during the 2009 financial crisis—it is not clear that the U.S. government has ever demanded a percentage of a company’s revenue without taking a formal equity stake.
The structure of the deal appears to be a carefully crafted workaround to a major legal obstacle: the U.S. Constitution forbids taxes on exports. To circumvent this, the terms have been structured as a “voluntary agreement” between the companies and the government, so the payment will not be officially classified as a tax or a tariff. Instead, Nvidia and AMD will voluntarily send the funds to the U.S. government, which will have total discretion over how the money is spent.
“It’s hard to identify any historical precedent for this sort of arrangement,” said Sarah Kreps, a law professor and director of the Tech Policy Institute at Cornell University’s Brooks School of Public Policy.
A Shift in National Security Strategy
The deal also signals a significant, pragmatic shift in the administration’s national security strategy toward China. For years, the U.S. government has sought to restrict China’s access to advanced American technology in an effort to slow its progress on AI and widen America’s lead. This new deal, however, appears to be a tacit acknowledgment that this strategy of containment has its limits.
The White House now seems to agree with the argument, long made by Nvidia’s CEO Jensen Huang, that a total export ban is ultimately counterproductive. The reasoning is that Chinese developers, deprived of American technology, would simply be forced to accelerate the development of their own domestic alternatives, which could undermine U.S. leadership in the long run.
According to a U.S. official, the White House now believes it is better to have China locked into using U.S.-made chips sold through legitimate, monitored channels than to force the country onto the black market, where it has already proven adept at obtaining restricted chips anyway.
“It seems like there’s been some vacillation within the administration about and toward China, and I think that reflects the internal divide within the administration between the China hawks and the economic pragmatists,” said Kreps. “It seems like increasingly, the economic pragmatists are holding sway.”
The Financial Calculus: A Price Worth Paying
For Nvidia, the 15% commission is a bitter pill to swallow, but one that is likely worth the cost. After the administration barred H20 sales in April, the company took billions of dollars in charges and lost revenue. Resuming shipments to China, even with the new “tax,” could mean billions more in annual revenue.
According to estimates from CFRA Research analyst Angelo Zino, Nvidia and AMD could collectively earn as much as $35 billion in annual revenue from the sales of their H20 and MI380 chips to China. That would translate to approximately $5 billion in annual revenue for the U.S. government.
“We acknowledge the tax will have a negative impact on profit margins tied to China sales but view the reentry into the second-largest GPU market to be worth the cost,” Zino said in an emailed commentary. The market appeared to agree, with shares of Nvidia rising modestly on Monday following the news.
The Technology and the Future
While the deal covers the H20 and MI308 chips, it does not include the most advanced, state-of-the-art American technology. President Trump on Monday called Nvidia’s H20 chip “obsolete,” a characterization that some experts dispute.
“These H20s are still state of the art,” said Scott Kennedy, a senior adviser at the Center for Strategic and International Studies. He noted that while they are less powerful in some ways than other Nvidia chips, they have other sophisticated elements, including advanced memory capabilities, that make them extremely valuable.
However, they are significantly less powerful than Nvidia’s top-tier H100, H200, and new Blackwell series chips, which are better equipped for the massive task of training large language models. The president, however, has left the door open for future deals involving this more advanced technology.
Trump said on Monday that he would consider allowing Nvidia to sell a modified, less powerful version of its super high-end Blackwell chip to China, but for a much higher price. “I’d make a deal a somewhat enhanced in a negative way. Blackwell, in other words, take 30% to 50% off of it,” he said, suggesting a new model where the level of technology access is directly tied to the percentage paid to the U.S. government.
A New Bargaining Chip in a Global Game
For the Trump administration, the deal is a multi-faceted victory. It allows the U.S. to maintain control over the export process, generates significant new revenue for the government, and, perhaps most importantly, gives the administration a powerful new bargaining chip in its ongoing, broader trade talks with China. Treasury Secretary Scott Bessent has referred to the Nvidia export controls as a key “negotiating chip” in those larger discussions.
China, for its part, has responded with its own public posturing, with state-affiliated media raising security concerns about potential “backdoors” in the American chips. However, this is largely seen by analysts as a negotiating tactic and a signal to Chinese tech companies to continue innovating, even as U.S. shipments resume.
The 15% solution is a novel and deeply controversial new front in the U.S.-China tech war. It is a pragmatic, if legally questionable, policy that attempts to balance the competing demands of national security, economic reality, and global trade diplomacy. How this new model of “pay-for-access” evolves will be a critical storyline in the ongoing battle for technological supremacy between the world’s two largest economies.
