When Congress passed the Export Control Reform Act in 2018, the intention was to prevent advanced technologies with military uses from falling into the hands of enemies.
Under President Donald Trump, export controls serve a different function: they give Trump leverage over private companies.
Microchipmaker Nvidia reportedly won a license to export some of its artificial intelligence chips to China, not because the Trump administration concluded that these chips don’t give China a military advantage, but because the company agreed to kick back 15% of its China sales to the U.S. Treasury.
Here’s a brief history: Congress passed the Export Control Reform Act in 2018, and under it, the Biden administration restricted the export of “certain high-end chips used in military applications” to China in 2022.
The Commerce Department argued that advanced microchips and related technologies “are used by the [People’s Republic of China] to produce advanced military systems including weapons of mass destruction; improve the speed and accuracy of its military decision making, planning, and logistics, as well as of its autonomous military systems; and commit human rights abuses.”
Because of this ruling, AI chipmaker Nvidia couldn’t export its cutting-edge H100 chips to China. In response, AMD and Nvidia began making less powerful chips called H20 in the hope that Uncle Sam would allow them to export.
This April, the Trump administration announced that it would continue the outright ban on Nvidia and AMD chips, including the H20.
However, in August, Trump reversed course, announcing he would grant Nvidia a license to export H20 chips on the condition that Nvidia pay 15% of its revenues from the sales to the U.S. government. This makes no sense if you take the president’s export controls as national security provisions.
If exporting these chips to China endangers U.S. security by improving China’s surveillance and weapons capabilities, then a 15% cut of the sales is hardly recompense. If exporting these chips to China does not harm national security, then the 15% kickback is simply Trump extracting tribute from a company over whom he has leverage.
Trump is the quid pro quo president, and this is how he does business. Disgraced former Democratic Illinois Gov. Rod Blagojevich, Trump’s supporter and beneficiary, once famously articulated the philosophy he shares with the president: “I’ve got this thing, and it’s f***ing golden,” Blagojevich said of his power to appoint a senator to fill former President Barack Obama’s seat. “And I’m just not giving it up for f***in’ nothing. I’m not going to do it.”
In Trump’s mind, if you have leverage over a person or a company, you’d be a sucker or a loser not to use it. If a company needs a license from the president in order to sell its goods, then the president ought to get something in return.
Trump isn’t enriching himself or even his party with this shakedown — the money will reduce the federal deficit — but the whole thing is nonetheless an abuse of power.
Trump’s rightful authority to restrict chip exports is grounded in national security considerations, not cash considerations. His using this power to squeeze dollars out of Nvidia is no different from a local health inspector withholding a restaurant license until the restaurant promises to contribute to the inspector’s favorite charity.
If Nvidia sued the Trump administration for wielding its export controls this way, the company might win, but it’s pretty obvious that Trump would find another way to retaliate. It’s easier to just pay the tax collector what he’s demanding.
Trump did this same sort of thing with Nippon Steel. The Biden administration blocked Nippon’s acquisition of US Steel (on weak grounds), and the Trump administration agreed — until Trump could squeeze some extraordinary concessions out of Nippon.
EUPHEMISMS FOR INCREASING SPECIAL-INTEREST POWER
Of course, Trump didn’t invent this sort of governing-by-shakedown. U.S. presidents have regularly abused their power over private companies. It’s one reason our government keeps increasing regulations, mandates, and subsidies — to increase the leverage bureaucrats and politicians have over the folks with money.
Trump, though, takes it to another level, because for him, everything is and ought to be a quid pro quo. The president, especially after decades of increased executive power, has lots of quids to give out. Trump is reaping a bumper crop of quos.