Whatever else one can say about Trump’s second term, it has a way of spotlighting forgotten corners of the Constitution.
Take Article I, Section 9, Clause 5: “No Tax or Duty shall be laid on Articles exported from any State.” Known as the Export Clause, it bars Congress or the states from imposing taxes on goods leaving the country or moving between states. The Supreme Court reaffirmed this as recently as 1996 in U.S. v. IBM.
That’s why eyebrows shot up when President Donald Trump unveiled his latest deal with chipmakers Nvidia and AMD: they can resume shipping certain AI chips to China, but only if they pay the federal government a 15 percent tax on the proceeds. Legal experts immediately pointed out the obvious—this looks like a textbook unconstitutional export tax, and possibly a violation of the 2018 Export Control Reform Act as well.
But pointing out illegality in Trump’s actions often feels futile. The only parties with standing to sue—Nvidia and AMD—have already agreed to go along with the deal. For now, the policy is moving forward, leaving analysts to ask a bigger question: what does this mean for the future of AI competition between the U.S. and China?
The chip war backstory
Though AMD is technically included in the deal, the real player here is Nvidia and its H20 chip. The H20 exists because of U.S. export controls limiting high-performance AI hardware. Nvidia took its flagship H100 training chip, dialed down its processing power to meet restrictions, but boosted memory bandwidth past even the H100’s level—making the H20 weaker for training but better for running AI models in real-world applications.
Critics saw the H20 as a clever workaround that followed the letter of Biden-era export rules while violating their spirit. The chip still gave Chinese firms powerful tools to close the AI gap with U.S. competitors. Back in April, the Trump administration even blocked Nvidia from getting export licenses for the H20.
Then came a reversal: after negotiations with China over rare earth metals and lobbying from Nvidia CEO Jensen Huang, Trump changed course in July, allowing shipments to go through. Now he’s tacked on the 15 percent export tax.
The stakes
The constitutional issues are obvious—this looks like the president asserting the power to unilaterally impose a tax, without congressional approval. But the strategic question is just as pressing: does letting China access H20s help companies like DeepSeek catch up with U.S. firms like OpenAI?
That’s where the debate splits. Supporters of the exports argue that business is business and the H20 isn’t powerful enough to tip the balance. Critics counter that China’s AI industry will benefit enormously, undermining the very purpose of export controls. For now, Nvidia ships, Trump collects, and the global AI arms race accelerates.
