Why the United States cuts from Chinese sales

abnormal. quid pro quo. Unprecedented.

This is some reaction to news, namely, the two tech giants in the world Will pay 15% of its revenue to the U.S. government From selling certain advanced chips to China. Industry observers, former government consultants, policy makers and trade experts have been commenting on the deal.

The news comes months after the Trump administration banned the sale of the chips to China, citing national security concerns.

The ban was lifted in mid-July. Now it seems that the U.S. government will take a step forward – to be part of these U.S. companies with China’s operations.

Critics find this both confusing and worrying.

These advanced chips were mainly used in artificial intelligence (AI) applications, when investors bet that AI would change the global economy.

Last month, NVIDIA (the world’s leading chip manufacturer) became the first company ever to sell for 4TN (3TN).

NVIDIA has developed the H20 chip and AMD has developed the MI308 chip, especially for the Chinese market.

They are not as good as the flagship chips of both companies, so they are not good and therefore cheap.

However, in the last administration of President Joe Biden banned U.S. companies from exporting state-of-the-art chips to China, so developing them is the only option to enter the Chinese market.

Even less powerful Chinese chips are banned under Trump.

Resuming sales to China is a boon for NVIDIA and AMD, because China is such a large market. China’s investment in AI has expanded so quickly that analysts expect investment to grow to about $100 billion this year – it’s growing nearly 50% compared to last year.

“Unprecedented…I don’t know what the word is, but it’s awful,” said Deborah Elms, a trade expert.

Other experts say no American company has done such a thing before.

But Trump approved Japan’s Japanese Steel Corporation’s approval of U.S. steel in June, and he did do something similar. These include a so-called “gold sharing”, a rare practice in which the government engages in corporate equity.

In this case, the White House has not yet said how the agreement will be implemented, such as where the money will be or how it will be used.

What’s more, what does it convey to other U.S. companies that see China as a major market or supplier — from Apple and Tesla to small furniture and toy makers? Is this the tax that the company is doing business with China now?

The 15% cut agreed by NVIDIA and AMD could hurt their bottom line, even if they make a substantial profit from sales to China.

Chip manufacturers plan operations ahead of time to weaken investor sentiment, which depends largely on revenue and revenue forecasts.

But the deal could be part of Trump’s ongoing tariff negotiations. Just last week, he threatened 100% tariffs on foreign-made chips unless the companies invested in the United States.

U.S. Commerce Secretary Howard Lutnick even said that in negotiations with China, chip exports are being used in exchange for opportunities to obtain rare earth elements.

That part is still unclear.

A U.S. official told Reuters that the White House does not believe that selling H20 and equivalent chips would harm national security – despite the fact that they were previously banned for those reasons.

National security experts and some lawmakers have long expressed concerns about the U.S. selling AI chips to China, saying Beijing could use them to gain an advantage in AI and military applications.

But others believe that limiting chip sales to China will not help, as it stimulates innovation and greater competition in China. Instead, they hope China will rely on American technology.

The latter argument seems to win – for the moment.

This is likely the result of strong lobbying by NVIDIA CEO Jensen Huang. He met Trump at the White House last Wednesday, and it was when they agreed to the deal.

It was Mr. Huang’s efforts that led to the reversal of the ban on Chinese H20 sales in April.

The deal is a win for China because it does want these chips.

Analysts say leading tech companies including Beast, Tencent and DeepSeek bought the H20 before cutting off visits to the U.S. in April.

It’s a win for the U.S. government, analyst Bernstein Research told the BBC that it can sell as much as $20 billion from chip sales to China.

If this leads to a deal with Beijing’s rare elements, then Washington could achieve further victories, which currently has a monopoly on key minerals.

But critics of the deal said they were shocked by the response to the White House.

“It’s completely different from the environment we used to be,” said Ms. Elms, a trade expert.

“I think you could call it the flexibility of the Trump White House in responding to requests.”