Trump initiates a period of cutthroat, exploitative business practices
The US government has entered into a unique agreement with Nvidia and AMD, two major semiconductor companies, where they will pay a 15% revenue share from their sales of AI chips to China in exchange for export licenses. This arrangement, often referred to as a licensing fee tied to export approvals, is not a traditional corporate tax but rather a novel form of revenue share that acts as a required "cut" or fee for the right to export certain advanced AI chips to China under US export control rules.
This new revenue-sharing system differs from conventional corporate taxes in several ways. It is specific to sales licensed for export to China, negotiated as a payment in exchange for export licenses rather than based on corporate income or profits, and functions similarly to a government revenue share of a selective commercial activity linked to national security concerns.
The implications of this new revenue-sharing system on the balance of power among the president, Congress, and American businesses are significant.
Presidential Power
The deal enhances the president’s leverage by enabling direct negotiation of financial terms linked to export licenses, potentially bypassing traditional legislative tax processes. President Trump personally negotiated this deal, indicating expanded executive influence.
Congressional Authority
The new revenue share could be seen as diminishing Congress's traditional role over taxation and trade policy, since this new revenue share emerged through executive negotiation rather than new legislation. It creates a precedent for the executive branch to impose quasi-tax measures via administrative actions.
Business Relations
Major US companies like Nvidia and AMD are forced to comply with unprecedented revenue-sharing terms to operate in a large market. This potentially limits firms' pricing autonomy and sets a precedent for increased government revenue claims tied to export permissions. Businesses may face higher costs directly transferred to the government, altering profit margins and pricing strategies.
Broader Economic Strategy
The deal is seen as a hybrid national security and economic policy tool, providing the US government with a revenue stream directly linked to sensitive exports, possibly to fund budgetary needs or national debt reduction. It also serves as "economic leverage" over China in trade negotiations and export control disputes.
Treasury officials have described this new model as a "beta test" that could extend to other industries, signaling potential expansion of this form of government revenue participation beyond semiconductors.
In summary, this revenue-sharing deal is not a legal corporate tax per se but a government export licensing fee with tax-like characteristics. It represents a distinct shift in how the executive branch can extract economic benefits from private-sector sales tied to sensitive export markets. This shift bolsters presidential authority in trade and economic policy decisions at the potential expense of congressional tax prerogatives and corporate autonomy.
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