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President Donald Trump has realigned global trade and American politics, ushering in a new era in which pay-to-play appears to be the new norm, and every interaction is a chance to score some extra cash — even if it means starting a global trade war or demanding a payout from America’s own industries.
ICYMI: American chipmakers Nvidia and AMD agreed to pay the US government 15% of their revenues from semiconductor sales to China in exchange for export licenses. It’s an unorthodox (and potentially illegal) arrangement which, at minimum, offers Trump a new way to exert even more control over American business.
The companies will now be able to resume selling chips in China, months after Trump blocked all semiconductor sales to the country, citing national security concerns. While that might not have sunk a company as large as Nvidia — which recently became the first public company ever to notch a $4 trillion valuation — it was still a hit to the bottom line. China made up 13% of Nvidia’s sales in 2024, and the company forecast billions in lost revenue if the ban stayed in place.
In exchange, they owe the government a cut of the proceeds. That’s about $5 billion a year going into the Treasury coffers, for Trump to spend as he wishes, according to estimates by analyst Angelo Zino at investment firm CFRA.
While the stock market’s reaction to the news was muted, many investors spoke out against the deal.
“This federal shakedown of private companies is unconstitutional,” said Peter Schiff, chief economist at asset manager Europac, in a post on X.
Mike O’Rourke, chief market strategist at JonesTrading, wrote in note to clients that it was “sad that these two companies would acquiesce to such a deal,” and that “they have exposed the rest of corporate America to the risk of needing to make deals with the government in order to transact business.”
While there doesn’t seem to be any historical precedent for this particular arrangement, it is consistent with the Trump playbook.
The key is to leverage the power of the presidency to inflict just enough pain — or threaten to do so — that it forces everyone to the negotiating table.
Trump has made an intentional strategy of manufacturing crises that he later claims credit for fixing. It’s a “set the neighborhood on fire then show up with a hose to help your neighbors, if they can pay you” approach to governing.
And Trump is not hiding this shakedown tactic — he’s bragging about it.
When discussing the hundreds of billions of dollars in corporate pledges and investment commitments included in recent trade agreements, Trump sees those financial commitments as a way for countries to “pay down” the threatened tariff rates, my colleague Phil Mattingly wrote last week.
“I got a signing bonus from Japan of $550 billion,” Trump told CNBC. “That’s our money. It’s our money to invest, as we like.”
Trump also uses tariffs as a cudgel to encourage companies to invest in domestic production. Apple, for one, managed to carve out an exemption from future semiconductor tariffs because it announced plans last week to invest $100 billion in the US over the next five years.
While this particular pay-to-play setup may be new and uncomfortable for titans of industry more accustomed to the free market ethos of the past, they may have little choice but to engage.
But more than that, part of the reason Trump may be so enamored with this heavy-handed capitalism is that it offers a novel (and again, not necessarily legal) way to centralize more power in the presidency.
Congress has become a lot weaker than originally envisioned in the nearly two-and-a-half centuries since it was created, but one of its lasting powers has been the ability to tax, and the ability to spend. Let’s talk about corporate taxes in general for a second and where that money has historically gone.
Corporate tax rates have been a political rallying cry for decades on both sides of the aisle. Democrats wanted to raise them, saying that corporations with staggering profits were not paying their fair share. Republicans argued that without untaxed multitudes of income, companies would simply hire fewer people, or even lay off thousands.
One part that both sides agreed on – or at least never seemed to publicly question – was that any taxes collected by the government would, like any other tax, be appropriated by Congress.
But Trump has undermined the entire crux of the argument with a new third way.
The Nvidia/AMD payouts are effectively a new form of corporate tax — one dictated to individual companies by the president, according to his singular whims, with proceeds directed to the Treasury, not to be appropriated by the legislature but to be spent as the president sees fit.
And while it’s a new way of doing things in the US, people in finance are using old terms to describe it.
Trump and his advisers “are learning that — as contrary as it may be to the free/efficient market capitalist ethos of the Republican party, it ticks so many other boxes that it is really irresistible to them: national security, revenue, reshoring, general industrial policy,” said Daniel Alpert, managing partner of Westwood Capital, in an email.
“This is a continuation of the state capitalist agenda that Trump… is clearly enamored with.”
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