Duty free

For months Nvidia could not sell a particular chip to China at any price. As of 10 August, it may sell it at 85% of the price. The Trump administration halted shipments of the H20, a processor designed to fit under America’s export limits, in April, then let sales resume in July.^{1Reuters, via KSLNvidia, AMD to pay 15% of China chip sale revenues to US, official says10 Aug 2025} On 10 August a government official told Reuters that Nvidia and AMD had agreed to hand over 15% of their China revenue from the H20 and AMD’s MI308, which the Financial Times reported was the condition for getting export licences.^{1Reuters, via KSLNvidia, AMD to pay 15% of China chip sale revenues to US, official says10 Aug 2025,2Bloomberg, via FortuneNvidia, AMD to pay 15% of China chip sale revenues to US10 Aug 2025}

Nvidia has not confirmed the figure. “We follow rules the U.S. government sets for our participation in worldwide markets,” a spokesperson said.^{1Reuters, via KSLNvidia, AMD to pay 15% of China chip sale revenues to US, official says10 Aug 2025} AMD did not respond to a request for comment. The administration, the official added, had not decided how to use the money, nor when or how the arrangement would begin.^{1Reuters, via KSLNvidia, AMD to pay 15% of China chip sale revenues to US, official says10 Aug 2025} It is unusual to settle the price of a thing before settling what it is for.

The price of a licence. Nvidia, first quarter of fiscal 2026 (to 27 April 2025), $bn

	$bn
H20 charge	4.5
H20 sales not shipped	2.5

Source: Nvidia first-quarter fiscal 2026 results³

We think the deal is a mistake, and not because chips to China should never be sold. There is a respectable case for selling the H20, which Howard Lutnick, the commerce secretary, has called Nvidia’s fourth-best chip, and which he linked to American talks with China over rare earths.^{1Reuters, via KSLNvidia, AMD to pay 15% of China chip sale revenues to US, official says10 Aug 2025} A licence is a judgement that a sale does no harm. If the judgement is that the H20 is safe enough, it is safe at any price.

That is the flaw. Once a licence carries a fee, it stops being only a security instrument and becomes a fiscal one. Alasdair Phillips-Robins, a former Commerce adviser, put it neatly: the administration looks to be “trading away national security protections for revenue for the Treasury”.^{1Reuters, via KSLNvidia, AMD to pay 15% of China chip sale revenues to US, official says10 Aug 2025} A regulator that was once asked “is this sale dangerous?” is now also asked “how much will it raise?” The second question tends to crowd out the first.

The incentives matter more than the principle. A 15% cut is paid on sales, so the more the licensor permits, the more the Treasury collects. The Commerce Department, which writes the rules on what Nvidia may ship, would have a stake in Nvidia’s shipping more. Next year’s rule on a better chip will be written by an official who knows what the last one earned. Nobody need act in bad faith for the thumb to land on the scale.

The money is real enough to tempt. Nvidia booked a $4.5bn charge in the quarter to 27 April, when a licence became necessary for the H20, and said it could not ship another $2.5bn of the chip.^{3NvidiaNVIDIA Announces Financial Results for First Quarter Fiscal 202628 May 2025} That charge was about a tenth of the quarter’s $44.1bn of revenue.^{3NvidiaNVIDIA Announces Financial Results for First Quarter Fiscal 202628 May 2025} The firm’s sales have more than doubled in a year to $130.5bn, from $60.9bn.^{4NvidiaNVIDIA Announces Financial Results for Fourth Quarter and Fiscal 202526 Feb 2025} Fifteen per cent of a business of that sort is a number a Treasury official will notice.

Defenders have a fair reply. The chips would be sold anyway, so the state is merely collecting a share of a rent that Nvidia would otherwise keep. Better a toll than a gift. But a toll is something a state may charge for use of its road, and this is a charge on leaving the country. The Constitution is blunt: “No Tax or Duty shall be laid on Articles exported from any State.”^{5National ArchivesThe Constitution of the United States: A Transcription17 Sept 1787} Washington can call the 15% a fee, a condition or a revenue share, and the lawyers will be paid well to find out which of them survives a challenge. A payment that may not survive a court is a shaky basis for a policy.

It is also a precedent. If a licence for chips can be bought with a cut of revenue, so can one for software, machine tools or pharmaceuticals, and so can the next. Foreign governments, who set their own export rules, will take notes.

What should happen? If the administration believes the H20 is safe to sell, it should say so, license it, and take nothing. If it wants revenue from exports, it should ask Congress, in a statute that can be read, argued over and tested in court. And it should say what the money is for before it counts it.

A security policy that pays by the unit sold is not a security policy. It is a shop, and the customers are on the other side of the world.