In a move that has sent ripples through the semiconductor industry, President Donald Trump recently announced a novel agreement with chip giants Nvidia Corp. and Advanced Micro Devices Inc., allowing them to export advanced AI chips to China in exchange for a cut of the revenue. Under the terms, the companies would remit 15% of their sales proceeds from these exports directly to the U.S. government, a setup Trump touted as a win for American interests amid escalating tensions with Beijing.

Legal experts, however, are raising alarms, pointing to potential violations of the U.S. Constitution. The deal, first detailed in a report by Fortune, appears to function as an export tax, which is explicitly forbidden under Article I, Section 9, Clause 5. This clause states that “no tax or duty shall be laid on articles exported from any state,” a provision designed to prevent the federal government from burdening interstate and international commerce.

The Constitutional Roadblock

Critics argue that Trump’s arrangement skirts this prohibition by framing it as a voluntary agreement rather than a formal tax. But as Derek Scissors, a China expert at the American Enterprise Institute, noted in the same Fortune article, there’s no historical precedent for such a revenue-sharing model on exports, likely because it treads on unconstitutional ground. The deal emerged from negotiations aimed at balancing national security concerns with economic pressures, as U.S. chipmakers have lobbied against strict export controls that could cede market share to foreign competitors.

Industry insiders view this as a pragmatic but precarious workaround. Nvidia, the world’s most valuable company with a market cap exceeding $4 trillion, has been ensnared in Trump’s broader AI trade war with China, according to a deep dive by CNN Business. The company conceded to the revenue split to gain approval for selling high-end GPUs, which are critical for AI development but restricted due to fears of military applications by adversaries.

National Security vs. Economic Realities

The arrangement has drawn bipartisan backlash, with some lawmakers questioning whether it commodifies export licenses. A commentary in the Los Angeles Times labeled it as putting “national security on sale to the highest bidder,” arguing that monetizing approvals undermines the integrity of trade policy. Trump defended the pact in a Politico interview, dismissing concerns and emphasizing the financial windfall for the U.S. Treasury.

For Nvidia and AMD, the deal offers a lifeline amid fluctuating export rules. Previous administrations imposed bans on certain chip sales, leading to billions in lost revenue, as evidenced by Nvidia’s $5.5 billion charge earlier this year from unsold inventory tied to China restrictions. Yet, legal scholars warn that if challenged in court, the agreement could be struck down, forcing a reevaluation of how the executive branch wields export controls.

Broader Implications for Trade Policy

This isn’t the first time Trump’s trade tactics have tested constitutional limits. His administration has previously navigated around export barriers by leveraging national security exemptions under the International Emergency Economic Powers Act. However, as highlighted in an analysis by The Hill, this “bizarre” revenue-sharing model lacks clear statutory backing and could invite lawsuits from affected companies or states.

Tech executives are watching closely, fearing precedent-setting fallout. If upheld, such deals might normalize government profit-sharing in exports, altering the dynamics of global supply chains. Conversely, a judicial rebuke could reinforce constitutional safeguards, compelling future administrations to seek congressional approval for similar measures.

Looking Ahead: Uncertainty in Silicon Valley

As Trump prepares for high-stakes meetings, including one with Russian President Vladimir Putin, the chip deal underscores his aggressive approach to economic nationalism. Industry groups like the Semiconductor Industry Association have remained muted, but internal discussions reveal anxiety over potential retaliatory actions from China, which could accelerate its domestic chip production.

Ultimately, this episode highlights the tension between innovation, security, and law in an era of technological rivalry. While the deal may provide short-term relief for Nvidia and AMD, its long-term viability hinges on navigating the Constitution’s firm stance against export duties—a reminder that even in high-tech trade wars, foundational principles endure.