Analysis
The cost of doing business in Trump’s America
Billions in investments and direct payments are buying tech firms room to operate.
Technology companies have managed to outmaneuver Donald Trump and find a way to evade tariffs and other sanctions he has imposed. It has cost them only a few hundred billion dollars, and, arguably, the self-respect of their executives.
In recent days, tech giants have secured exemptions from 100% tariffs on chips and gained permission to export chips to China, despite those exports having been previously prohibited. How? They pledged to invest hundreds of billions of dollars into the U.S. economy and government, and, in some cases, flattered Trump personally.
Last week, Trump announced a 100% tariff on imported chips. But the tariff came with a major caveat: “The good news for companies like Apple is if you’re building in the United States or have committed to build, without question, committed to build in the United States, there will be no charge,” he said.
If there was any doubt about his meaning, it vanished when Apple CEO Tim Cook appeared beside him. Just minutes earlier, Cook had pledged to increase manufacturing investments in the United States by $100 billion, adding to the $500 billion Apple had already committed. He also managed to win Trump’s favor with a personal gesture: presenting him with a statue made of Corning glass, the same material used in iPhones, engraved with the Apple logo and the inscriptions "President Donald Trump," "Apple’s American Manufacturing Program," and "Made in the USA," alongside Cook’s signature. The statue rests on a 24-karat gold base.
Apple is not alone in receiving this lucrative exemption. Taiwan’s Minister of National Development, Chin-Ching Liu, announced that chip manufacturing giant TSMC will avoid tariffs thanks to its investment in a manufacturing facility in Arizona. TSMC produces most of the world’s most advanced chips, supplying companies like Nvidia and Apple. Tariffs on its chips would sharply increase the prices of products such as smartphones and the cost of building data centers.
South Korea’s Trade Minister, Yeo Han-Gu, confirmed that Samsung and SK will also be exempt. Both companies are building chip factories in the United States, and Samsung recently secured a $16.6 billion contract to manufacture Tesla’s next-generation chips in Texas.
H20 Chips Bound for China
This week it became clear that Trump’s “relief for dollars” formula is not a one-off tactic, but could become a cornerstone of his economic policy.
Earlier this week, the Financial Times reported that chip giants Nvidia and AMD have agreed to pay the U.S. government 15% of the revenue from chips sold in China, under an unusual agreement granting them export licenses.
In April, the government banned Nvidia from exporting its H20 AI chip to China, a chip specifically designed to comply with earlier export restrictions. But last Friday, the U.S. Commerce Department approved renewed exports of the H20, and authorized AMD to export its MI308 AI chip to China as well. The catch: both licenses were issued in exchange for the companies’ commitment to hand over 15% of sales revenue from these chips to the U.S. government.
Research firm Bernstein estimated that, had Nvidia received approval earlier this year, H20 sales in China could have generated $23 billion by 2025, meaning the U.S. government would collect roughly $3.45 billion. Experts say no American company has ever before agreed to pay a percentage of its revenue in exchange for an export license.
Nvidia told Calcalist: “We are following the rules that the government sets regarding our participation in global markets. Although we have not shipped H20 to China for months, we hope that the export regulations will allow America to compete in China and around the world. America cannot repeat the 5G mistake and lose its leadership in the field of communications. The United States' AI technology portfolio can become a global standard if we participate in the race.”
AMD declined to comment.
The Prospect of a ‘Blackmail Economy’
Both cases reveal a pattern that could define the Trump administration: companies direct large sums toward priorities important to the president, and in return, the White House grants exemptions from tariffs or export bans.
Alternatively, critics warn, this could resemble a “blackmail economy”: If you don’t give us billions of dollars, we will shut down your business.
In effect, Trump is leveraging the power of the federal government to compel companies to surrender billions in revenue. While the short-term gains for the government are clear, the long-term consequences could be severe.
For example, a young company trying to break into the chip industry but lacking the funds to inject hundreds of billions into the U.S. economy would be forced to compete at a major disadvantage, paying 100% tariffs on imported chips and barred from selling to China. Such policies could entrench the dominance of established corporations while stifling competition from startups.
Not exactly the American dream.
