1 00:00:00,400 --> 00:00:04,360 In a move that rewrites the rules of American capitalism, 2 00:00:04,600 --> 00:00:08,800 NVIDIA and AMD have agreed this week to pay the US government 3 00:00:09,000 --> 00:00:14,520 15% of the revenues from chip sales in China, not as a tax or 4 00:00:14,520 --> 00:00:18,880 as a royalty, but as a price for permission to export recently 5 00:00:18,880 --> 00:00:23,640 restricted AI chips to China. This is not a tariff, it's not a 6 00:00:23,640 --> 00:00:26,920 licensing fee. It's not even a penalty. 7 00:00:27,160 --> 00:00:31,800 It's a cut a direct slice of corporate revenue handed to the 8 00:00:31,800 --> 00:00:35,200 federal government in exchange for the right to export. 9 00:00:35,520 --> 00:00:39,560 The deal personally brokered by the president applies to 10 00:00:39,560 --> 00:00:44,760 Nvidia's Age 20 and AM DS equivalent AI chips, both of 11 00:00:44,760 --> 00:00:49,000 which were specifically designed to comply with earlier export 12 00:00:49,000 --> 00:00:53,000 restrictions. In return for export licenses, 13 00:00:53,200 --> 00:00:58,040 the companies will pay the US Treasury an estimated $2 billion 14 00:00:58,040 --> 00:01:01,360 per year. This is not how American trade 15 00:01:01,360 --> 00:01:06,000 policy is supposed to work. Traditionally, export controls 16 00:01:06,040 --> 00:01:10,000 are binary and based on national security decisions. 17 00:01:10,280 --> 00:01:13,880 Either it's reasonable to sell a particular product abroad or it 18 00:01:13,880 --> 00:01:16,400 isn't. You would think that national 19 00:01:16,400 --> 00:01:20,360 security concerns are non negotiable, but this deal 20 00:01:20,440 --> 00:01:25,360 introduces 1/3 category safe enough if the price is right. 21 00:01:25,560 --> 00:01:29,960 It's a transactional model which sets a precedent which could 22 00:01:29,960 --> 00:01:33,320 reshape how the US government interacts with the business 23 00:01:33,320 --> 00:01:36,160 community. Based on estimates from 24 00:01:36,160 --> 00:01:41,680 Bernstein Research, NVIDIA would likely sell 1.5 million H 20 25 00:01:41,680 --> 00:01:46,400 chips in China this year, generating about $23 billion in 26 00:01:46,400 --> 00:01:51,960 revenue, with AMD contributing another $800 million in sales. 27 00:01:52,240 --> 00:01:57,920 A 15% cut of that total yields roughly $2.1 billion to the US 28 00:01:57,920 --> 00:02:00,720 Treasury. Now, maybe you think none of 29 00:02:00,720 --> 00:02:04,600 this matters, that these chips are just powering chat bots and 30 00:02:04,600 --> 00:02:07,480 translation tools. But if you worry about the 31 00:02:07,480 --> 00:02:11,880 military applications of AIA, deal like this starts to look 32 00:02:11,880 --> 00:02:16,040 less like pragmatism and more like a strategic blunder. 33 00:02:16,320 --> 00:02:19,640 And the 15% premium that Trump negotiated? 34 00:02:19,880 --> 00:02:23,800 It's probably less than what Chinese AI firms were already 35 00:02:23,800 --> 00:02:27,760 paying to smuggle these chips in through third countries. 36 00:02:28,040 --> 00:02:32,320 In that light, this isn't a windfall, it's a discount. 37 00:02:33,000 --> 00:02:38,240 Now, some reporting has floated higher sales figures, 5 to 7 1/2 38 00:02:38,240 --> 00:02:42,080 billion dollars annually. But these projections assume 39 00:02:42,080 --> 00:02:46,840 perfect conditions, full market access, no domestic Chinese 40 00:02:46,840 --> 00:02:50,400 competition, and maximum volumes being sold. 41 00:02:50,720 --> 00:02:56,440 That scenario would require NVIDIA and AMD to capture 100% 42 00:02:56,440 --> 00:03:00,960 of China's AI chip market. Which is both unlikely and 43 00:03:00,960 --> 00:03:05,120 unsustainable in the long term, especially when Chinese firms 44 00:03:05,120 --> 00:03:09,360 like Huawei are racing to develop homegrown alternatives. 45 00:03:10,000 --> 00:03:13,920 Even if the upper bound were reached, the numbers are still 46 00:03:13,920 --> 00:03:18,120 trivial in the context of federal finances. the US 47 00:03:18,120 --> 00:03:23,680 government spends around $18.6 billion per day, meaning that 48 00:03:23,680 --> 00:03:28,640 this $2 billion windfall covers about 2 1/2 hours of government 49 00:03:28,640 --> 00:03:31,960 spending. It's not so much a windfall as a 50 00:03:31,960 --> 00:03:36,320 rounding error in the federal budget and an insanely low price 51 00:03:36,320 --> 00:03:38,800 to be paid for national security. 52 00:03:38,840 --> 00:03:43,200 If the risks are real, critics argue that Trump may have 53 00:03:43,200 --> 00:03:46,920 surrendered a key pillar of America's tech containment 54 00:03:46,920 --> 00:03:52,280 strategy for spare change. Liza Tobin, a former National 55 00:03:52,280 --> 00:03:56,800 Security Council China expert, told the Financial Times that 56 00:03:56,800 --> 00:04:01,480 Beijing must be gloating to see Washington turn export licenses 57 00:04:01,480 --> 00:04:05,280 into revenue streams. What's next, she asked, letting 58 00:04:05,280 --> 00:04:10,160 Lockheed Martin sell F30 fives to China for a 15% Commission? 59 00:04:10,520 --> 00:04:14,880 Trump, for his part, is not hiding the transactional nature 60 00:04:14,880 --> 00:04:17,839 of the deal. At a press conference, he said 61 00:04:18,040 --> 00:04:22,640 that Nvidia's CEO had asked for a release on export restrictions 62 00:04:22,840 --> 00:04:27,680 and that Trump asked for 20% and was haggled down to 15%. 63 00:04:28,080 --> 00:04:31,840 This isn't just a new deal, it's a new doctrine. 64 00:04:32,120 --> 00:04:36,240 As CNN put it, Trump has ushered in an era of shakedown 65 00:04:36,240 --> 00:04:39,920 capitalism. Aaron Bartnik, a former White 66 00:04:39,920 --> 00:04:44,440 House tech official, told the FT that this is essentially just a 67 00:04:44,440 --> 00:04:48,120 kickback to the federal government for allowing NVIDIA 68 00:04:48,120 --> 00:04:51,760 and AMD to undermine US National Security. 69 00:04:52,400 --> 00:04:56,880 The legal basis for this deal is shaky at best. the US 70 00:04:56,880 --> 00:05:01,760 Constitution's export clause prohibits taxes or duties on 71 00:05:01,760 --> 00:05:07,160 exports, and the Export Controls Reform Act bars fees for export 72 00:05:07,160 --> 00:05:11,320 licenses. Whether this 15% cut qualifies 73 00:05:11,320 --> 00:05:15,800 as either is unclear, but it walks a fine line between deal 74 00:05:15,800 --> 00:05:18,640 making and constitutional overreach. 75 00:05:19,040 --> 00:05:21,640 This type of deal isn't A1 off either. 76 00:05:21,840 --> 00:05:26,440 It's part of a broader pattern of a presidency that governs by 77 00:05:26,440 --> 00:05:31,120 deal, not doctrine. In Trump's Washington policy 78 00:05:31,120 --> 00:05:34,800 doesn't appear to be written. It's instead bargained for. 79 00:05:35,000 --> 00:05:38,520 And if you're NVIDIA, the cost of doing business in China is a 80 00:05:38,520 --> 00:05:44,040 15% cut to the US Treasury. The chip deal wasn't conceived 81 00:05:44,040 --> 00:05:47,200 in a committee room or hashed out by trade lawyers and 82 00:05:47,200 --> 00:05:51,280 national security experts. It was entirely forged in the 83 00:05:51,280 --> 00:05:56,080 Oval Office, where Nvidia's CEO made his case directly to the 84 00:05:56,080 --> 00:05:58,000 president. The result? 85 00:05:58,200 --> 00:06:01,800 A fast tracked approval and a deal that looks less like 86 00:06:01,800 --> 00:06:05,920 thoughtful governance and more like a hastily arranged toll 87 00:06:06,160 --> 00:06:09,320 collected at the gates of executive discretion. 88 00:06:09,880 --> 00:06:12,960 This is by no means an isolated incident. 89 00:06:13,160 --> 00:06:16,720 It's a pattern. Apple's Tim Cook gifted Trump a 90 00:06:16,720 --> 00:06:22,040 gold mounted plaque and pledged $600 billion in U.S. investment. 91 00:06:22,360 --> 00:06:26,680 Days later, Trump announced plans for new tariffs on chip 92 00:06:26,680 --> 00:06:30,080 imports, but said that Apple would be spared. 93 00:06:30,360 --> 00:06:32,120 Coincidence. Maybe. 94 00:06:32,360 --> 00:06:36,560 But in Trump's economy, flattery will get you a long way, and the 95 00:06:36,560 --> 00:06:39,200 right meeting can rewrite policy. 96 00:06:39,720 --> 00:06:44,080 The editorial board of the FT describes this as pay to play. 97 00:06:44,480 --> 00:06:47,240 Trump, on the other hand, calls it deal making. 98 00:06:47,680 --> 00:06:51,840 Either way, the rules are clear. If you want to sell, invest or 99 00:06:51,840 --> 00:06:55,320 operate with limited interference, you need a 100 00:06:55,320 --> 00:06:59,440 presidential relationship. What we're seeing now is 101 00:06:59,440 --> 00:07:03,120 governance by negotiation, not legislation. 102 00:07:03,400 --> 00:07:07,360 The invisible hand of the market has been replaced by the visible 103 00:07:07,360 --> 00:07:11,080 handshake of the president. CE OS are no longer just 104 00:07:11,080 --> 00:07:14,760 managing companies, They're managing their relationships 105 00:07:14,760 --> 00:07:18,640 with Trump and those who can't afford the price of admission. 106 00:07:18,960 --> 00:07:23,360 They're left to navigate a regulatory landscape that shifts 107 00:07:23,360 --> 00:07:27,520 with the president's mood. It's not good for any country to 108 00:07:27,520 --> 00:07:31,000 have a leader constantly inserting himself into private 109 00:07:31,000 --> 00:07:35,280 businesses, making decisions for them while having no stake in 110 00:07:35,280 --> 00:07:38,800 their success or failure. Historically, voters worried 111 00:07:38,960 --> 00:07:42,400 about left-leaning parties interfering in businesses to 112 00:07:42,400 --> 00:07:45,960 their detriment, and now it appears we have to worry about 113 00:07:45,960 --> 00:07:49,520 both sides. The implications of this new 114 00:07:49,520 --> 00:07:53,440 reality are profound. Long term planning becomes 115 00:07:53,440 --> 00:07:57,880 impossible, compliance becomes bargaining, and the line between 116 00:07:57,880 --> 00:08:02,040 public policy and personal favour blurs into something more 117 00:08:02,040 --> 00:08:06,080 familiar in emerging markets than in an advanced economy like 118 00:08:06,080 --> 00:08:10,240 the United States. Jensen Wong, who was notably 119 00:08:10,240 --> 00:08:14,440 absent from Trump's tech broligarchy at the inauguration, 120 00:08:14,720 --> 00:08:19,280 still managed to find a way in by leveraging Nvidia's strategic 121 00:08:19,280 --> 00:08:22,720 importance. His tactic worked, but it also 122 00:08:22,720 --> 00:08:27,440 set a precedent that lobbying, not law, is the path to policy 123 00:08:27,560 --> 00:08:31,960 and business success. This isn't simply a new style of 124 00:08:31,960 --> 00:08:35,159 leadership. It's a new operating system for 125 00:08:35,159 --> 00:08:39,600 American capitalism, one where executive power is personalized, 126 00:08:39,840 --> 00:08:44,120 discretionary and transactional. And while Trump supporters hail 127 00:08:44,120 --> 00:08:49,600 it as bold pragmatism, where the United States has ACEO, critics 128 00:08:49,600 --> 00:08:53,960 see something else A presidency that's rewriting the boundaries 129 00:08:53,960 --> 00:08:57,400 of executive power and possibly the Constitution. 130 00:08:58,160 --> 00:09:02,440 Some parts of the Constitution are open to interpretation, but 131 00:09:02,440 --> 00:09:05,480 Article 1, Section 9 is not one of them. 132 00:09:05,760 --> 00:09:10,240 It states that no tax or duty shall be laid on articles 133 00:09:10,240 --> 00:09:14,840 exported from any state. And yet the Trump administration 134 00:09:14,840 --> 00:09:18,160 has struck a deal that looks suspiciously like a 135 00:09:18,160 --> 00:09:21,280 constitutionally prohibited export tax. 136 00:09:22,040 --> 00:09:26,440 If it's not a tax, it could then be seen as an export license. 137 00:09:26,600 --> 00:09:28,600 But that doesn't really work either. 138 00:09:29,080 --> 00:09:32,920 Under the Export Controls Reform Act, the government is also 139 00:09:32,920 --> 00:09:36,960 prohibited from charging fees for export licenses. 140 00:09:37,280 --> 00:09:41,400 That's not a technicality. It's a direct legal constraint. 141 00:09:42,280 --> 00:09:46,520 The administration insists that this isn't a tax of duty or a 142 00:09:46,520 --> 00:09:49,600 licensing fee. It's just a deal, they say. 143 00:09:49,840 --> 00:09:52,920 But if it's not a tax or a fee, what is it? 144 00:09:53,160 --> 00:09:56,520 A donation? A tribute more troubling than 145 00:09:56,520 --> 00:10:00,280 the semantics is the process, or lack thereof. 146 00:10:00,600 --> 00:10:03,400 Congress had no role in this arrangement. 147 00:10:03,560 --> 00:10:06,200 No hearings were held. There were no votes. 148 00:10:06,320 --> 00:10:09,800 There was no oversight. Just a handshake in the Oval 149 00:10:09,800 --> 00:10:14,280 Office, a press release and a tiny revenue stream directed to 150 00:10:14,280 --> 00:10:17,640 the Treasury. As Gary Hofbauer of the Peterson 151 00:10:17,640 --> 00:10:22,040 Institute put it, that's not how historically we've done business 152 00:10:22,040 --> 00:10:25,760 in this country. The legal ambiguity is 153 00:10:25,760 --> 00:10:28,640 compounded by enforcement paralysis. 154 00:10:28,880 --> 00:10:32,680 Who's going to sue? Not NVIDIA or AMD. 155 00:10:32,880 --> 00:10:36,560 They are beneficiaries. NVIDIA had to take a four and a 156 00:10:36,560 --> 00:10:41,120 half billion dollar write down on its unsold H20 inventory in 157 00:10:41,120 --> 00:10:45,280 May, and now it gets to sell all of those chips and more. 158 00:10:45,640 --> 00:10:49,280 Without a clear plaintiff, the courts may never weigh in. 159 00:10:49,520 --> 00:10:52,720 And that leaves the deal floating in a constitutional 160 00:10:52,720 --> 00:10:57,040 limbo, contested, unchallenged, and potentially precedent 161 00:10:57,040 --> 00:11:00,720 setting. Lawmakers from both parties have 162 00:11:00,720 --> 00:11:05,160 sounded the alarm about this. Republican Representative John 163 00:11:05,160 --> 00:11:09,320 Moulinar warned that the deal incentivizes the government to 164 00:11:09,320 --> 00:11:12,840 trade strategic restraint for short term revenue. 165 00:11:13,240 --> 00:11:18,320 Democrat Raja Krishnamurti called it a dangerous signal to 166 00:11:18,360 --> 00:11:22,880 allies and adversaries alike that American principles are now 167 00:11:22,880 --> 00:11:26,400 negotiable. The precedent that this deal 168 00:11:26,400 --> 00:11:30,200 sets is quite chilling. If export controls can be 169 00:11:30,200 --> 00:11:34,320 monetized, what's next? Could a fee be paid so companies 170 00:11:34,320 --> 00:11:36,520 could sell weapons to enemy countries? 171 00:11:36,760 --> 00:11:40,160 Maybe a high duty on fentanyl would make that OK. 172 00:11:40,480 --> 00:11:43,640 The logic is slippery and the slope is steep. 173 00:11:44,000 --> 00:11:48,080 Stacy Rykson at Bernstein Research wrote that while the 174 00:11:48,080 --> 00:11:52,360 deal makes sense for NVIDIA and AMD, can you now just buy your 175 00:11:52,360 --> 00:11:57,560 way out of National security? Apparently the answer is yes for 176 00:11:57,640 --> 00:12:02,360 15% of revenues, or 2 1/2 hours of the government budget. 177 00:12:03,480 --> 00:12:08,080 If the legal footing is shaky, the strategic rationale is even 178 00:12:08,080 --> 00:12:11,960 more contested, especially when national security is the 179 00:12:11,960 --> 00:12:14,880 supposed justification for export bonds. 180 00:12:15,640 --> 00:12:20,280 Export controls were once the firewall of American strategy, a 181 00:12:20,280 --> 00:12:24,040 binary gate that separated what could be sold from what 182 00:12:24,040 --> 00:12:26,960 couldn't. If a technology posed a national 183 00:12:26,960 --> 00:12:30,320 security risk, it simply couldn't leave the country. 184 00:12:30,560 --> 00:12:35,440 No exceptions, no negotiations, no revenue sharing agreements. 185 00:12:35,680 --> 00:12:40,280 But this deal with NVIDIA and AMD has introduced 1/3 category 186 00:12:40,480 --> 00:12:42,720 safe enough if the price is right. 187 00:12:43,000 --> 00:12:46,640 The result is a transactional model that turns national 188 00:12:46,640 --> 00:12:49,360 security into a negotiable asset. 189 00:12:49,840 --> 00:12:54,840 The chip at the center of this debate, Nvidia's H20, is not 190 00:12:54,840 --> 00:12:59,000 obsolete, despite Trump's claims it's not powerful enough to 191 00:12:59,000 --> 00:13:03,640 train large language AI models, but it is one of the best chips 192 00:13:03,640 --> 00:13:08,240 in the market for inference, the operational phase of AI, where 193 00:13:08,240 --> 00:13:11,640 trained models are deployed to generate answers, make 194 00:13:11,640 --> 00:13:14,080 predictions, and do calculations. 195 00:13:14,080 --> 00:13:20,360 The the H20 is in fact 20% faster than Nvidia's Band H100 196 00:13:20,360 --> 00:13:24,840 at inference, and importantly, is far more capable than 197 00:13:24,840 --> 00:13:27,520 anything available from Chinese firms. 198 00:13:27,880 --> 00:13:32,960 Getting access to these chips at a 15% markup is a huge win for 199 00:13:32,960 --> 00:13:37,640 China, especially when Trump says that he'll put a 100% 200 00:13:37,640 --> 00:13:42,600 tariff on American chip imports. Getting access to inference 201 00:13:42,600 --> 00:13:47,280 chips matters a lot for Chinese AI companies, as inference has 202 00:13:47,280 --> 00:13:51,600 recently become the strategic bottleneck for AI companies. 203 00:13:52,120 --> 00:13:55,920 Training gets all the headlines, billion dollar data centers, 204 00:13:56,120 --> 00:14:00,040 massive compute runs. But inferences where most of the 205 00:14:00,040 --> 00:14:04,800 energy cost and chips are consumed over time and as 206 00:14:04,800 --> 00:14:08,520 reasoning models become the norm, inference demands have 207 00:14:08,520 --> 00:14:12,320 skyrocketed. These models don't just spew out 208 00:14:12,320 --> 00:14:16,840 an answer to a question, they pause, simulate, and select. 209 00:14:17,080 --> 00:14:19,640 And that pause that you see is compute. 210 00:14:19,800 --> 00:14:24,200 And that compute requires a lot of chips and consumes a lot of 211 00:14:24,200 --> 00:14:27,720 power. China's AI labs have managed to 212 00:14:27,720 --> 00:14:32,080 train frontier models despite hardware restrictions, but 213 00:14:32,080 --> 00:14:36,680 serving those models to users has proven a lot more difficult. 214 00:14:37,040 --> 00:14:41,280 Moon Shot's Kimi K2 model, for example, launched a great 215 00:14:41,280 --> 00:14:45,520 fanfare both in China and the West, but within days it was 216 00:14:45,520 --> 00:14:49,720 having to apologize online to users because it was so slow at 217 00:14:49,720 --> 00:14:55,000 inference, likely driven by a of inference chips like the H20. 218 00:14:55,480 --> 00:14:59,400 China does have a hidden advantage on this front, cheap 219 00:14:59,400 --> 00:15:02,920 and abundant energy. Unlike in the West where data 220 00:15:02,920 --> 00:15:07,120 center expansion is often constrained by grid capacity and 221 00:15:07,120 --> 00:15:12,080 permitting delays, China's state backed infrastructure allows AI 222 00:15:12,080 --> 00:15:15,840 firms to plug in and scale up with minimal friction. 223 00:15:16,280 --> 00:15:20,640 Inference is energy intensive, and China is structurally better 224 00:15:20,640 --> 00:15:24,280 positioned to absorb more of that cost than almost any other 225 00:15:24,280 --> 00:15:29,320 country in the world. Trump's reversal on H20 exports 226 00:15:29,480 --> 00:15:33,880 may unlock China's inference bottleneck, but it also unlocks 227 00:15:33,880 --> 00:15:36,800 something else strategic ambiguity. 228 00:15:37,080 --> 00:15:41,440 The H20 chip, while commercially valuable, may also carry 229 00:15:41,440 --> 00:15:46,040 telemetry features, data on temperature, power usage, and 230 00:15:46,040 --> 00:15:49,560 utilization. This could theoretically be 231 00:15:49,560 --> 00:15:52,320 repurposed for geolocation tracking. 232 00:15:52,680 --> 00:15:56,640 The proposed Chip Security Act would mandate this type of 233 00:15:56,640 --> 00:16:00,560 tracking to prevent smuggling and unauthorized use. 234 00:16:00,840 --> 00:16:05,040 In an era of hyperconnectivity, the line between tracking and 235 00:16:05,040 --> 00:16:08,960 surveillance is thin. It's not just Washington that's 236 00:16:08,960 --> 00:16:12,600 uneasy about this deal. Beijing has launched its own 237 00:16:12,600 --> 00:16:16,920 investigation into American design chips, demanding the tech 238 00:16:16,920 --> 00:16:21,800 giants like Alibaba and Byte Dance justify any purchases and 239 00:16:21,800 --> 00:16:25,680 explain why they aren't using Chinese made alternatives. 240 00:16:26,040 --> 00:16:30,800 The concern that Nvidia's chips might contain back doors, latent 241 00:16:30,800 --> 00:16:34,560 vulnerabilities, or remote access features that could 242 00:16:34,560 --> 00:16:39,400 compromise Chinese security. NVIDIA denies that anything like 243 00:16:39,400 --> 00:16:43,520 this exists, but the suspicion reflects a broader truth. 244 00:16:43,760 --> 00:16:47,360 In the modern world, even commercial hardware has spine 245 00:16:47,360 --> 00:16:51,160 capabilities. The Chinese governments concern 246 00:16:51,400 --> 00:16:55,040 isn't that far fetched. The US has long worried about 247 00:16:55,040 --> 00:16:59,400 similar risks from Chinese technology, especially in 5G 248 00:16:59,400 --> 00:17:03,640 networks, and it wouldn't be unprecedented for Washington to 249 00:17:03,640 --> 00:17:07,400 embed surveillance tools in foreign targeted hardware. 250 00:17:08,000 --> 00:17:13,599 In 2021, the FBI ran a global sting operation using a norm A 251 00:17:13,599 --> 00:17:18,040 supposedly secure encrypted phone sold to criminal networks 252 00:17:18,040 --> 00:17:21,520 around the world. What users didn't know was that 253 00:17:21,520 --> 00:17:25,680 the supposedly secure devices were transmitting their messages 254 00:17:25,760 --> 00:17:28,280 directly to U.S. law enforcement. 255 00:17:28,560 --> 00:17:34,240 The platform was a Trojan horse, marketed as privacy enhanced but 256 00:17:34,240 --> 00:17:38,160 engineered for surveillance. So when Beijing worries about 257 00:17:38,160 --> 00:17:41,920 using a chip that was designed specifically for the Chinese 258 00:17:41,920 --> 00:17:45,840 market, it's not paranoia, it's a reasonable fear. 259 00:17:46,280 --> 00:17:50,880 Trump's defenders argue that it makes sense to follow and engage 260 00:17:50,880 --> 00:17:55,480 to constrained strategy with China and AI chips if the US 261 00:17:55,480 --> 00:17:59,440 sells downgraded chips that are better than the locally produced 262 00:17:59,440 --> 00:18:02,040 ones. This, they argue, will keep 263 00:18:02,040 --> 00:18:04,720 China dependent on US technology. 264 00:18:05,040 --> 00:18:08,800 But history suggests that this type of strategy energy doesn't 265 00:18:08,800 --> 00:18:12,640 work very well, as China has a history of refurbishing and 266 00:18:12,640 --> 00:18:17,480 optimizing even limited hardware for military grade applications. 267 00:18:17,720 --> 00:18:23,040 And the H20 is not that limited. Trump's deal sends a troubling 268 00:18:23,040 --> 00:18:27,280 signal to allies who now see the US putting a price tag on 269 00:18:27,280 --> 00:18:30,840 national security. If Washington can waive its own 270 00:18:30,840 --> 00:18:34,840 restrictions for $2 billion, why shouldn't they do the same 271 00:18:34,840 --> 00:18:38,320 thing? This isn't just a policy shift. 272 00:18:38,480 --> 00:18:42,240 It's a credibility crisis. And while the chips may be 273 00:18:42,240 --> 00:18:46,240 flowing, the process that enabled them raises deeper 274 00:18:46,240 --> 00:18:50,520 questions about how decisions are made and who's making them. 275 00:18:51,160 --> 00:18:54,760 In Trump's Washington, the broader government no longer 276 00:18:54,760 --> 00:18:56,560 governs. It reacts. 277 00:18:56,800 --> 00:19:00,360 The NVIDIA deal wasn't vetted through the usual channels of 278 00:19:00,360 --> 00:19:03,600 export control or national security review. 279 00:19:03,760 --> 00:19:07,680 It was brokered in the Oval Office, bypassing the Bureau of 280 00:19:07,680 --> 00:19:11,920 Industry and Security and sidelining Congress entirely. 281 00:19:12,200 --> 00:19:14,920 This isn't governance by process. 282 00:19:15,080 --> 00:19:18,640 It's governance by handshake. And it's not the first time that 283 00:19:18,640 --> 00:19:22,200 this has happened. The Nippon Steel acquisition was 284 00:19:22,200 --> 00:19:26,080 approved earlier this year only after Trump personally 285 00:19:26,080 --> 00:19:30,360 negotiated a golden share arrangement granting the US 286 00:19:30,360 --> 00:19:34,000 president veto power over corporate decisions. 287 00:19:34,560 --> 00:19:39,320 Intel CEO was publicly rebuked by Trump and then privately 288 00:19:39,320 --> 00:19:42,360 redeemed. Apple dodged taxes with an 289 00:19:42,360 --> 00:19:45,080 investment pledged and a gold plated plaque. 290 00:19:45,440 --> 00:19:50,080 The pattern is quite clear. Policy outcomes hinge not on 291 00:19:50,080 --> 00:19:54,160 analysis and deliberation, but on executive discretion. 292 00:19:54,520 --> 00:19:58,640 Trump isn't just bypassing the system, he's replacing it with a 293 00:19:58,640 --> 00:20:02,600 loyalty test. This style of governance may 294 00:20:02,600 --> 00:20:06,560 work for huge companies like NVIDIA, but what about the rest 295 00:20:06,560 --> 00:20:10,680 of the economy? Trump's hastily arranged and 296 00:20:10,680 --> 00:20:14,920 constantly adjusted tariff regime has created A2 tier 297 00:20:14,920 --> 00:20:18,760 system, one for mega cap companies with billion dollar 298 00:20:18,760 --> 00:20:23,520 war chests and direct access to the Oval Office, and another for 299 00:20:23,520 --> 00:20:28,160 the rest of American businesses. While the biggest businesses can 300 00:20:28,160 --> 00:20:32,120 secure meetings at the White House and lobby for favorable 301 00:20:32,120 --> 00:20:36,680 outcomes, small businesses are left absorbing the full cost of 302 00:20:36,680 --> 00:20:40,640 the trade war with no exemptions and no recourse. 303 00:20:41,080 --> 00:20:45,360 This matters, as innovation doesn't typically come from the 304 00:20:45,360 --> 00:20:49,360 biggest businesses. It bubbles up from startups and 305 00:20:49,360 --> 00:20:51,880 firms that are challenging the status quo. 306 00:20:52,280 --> 00:20:56,920 When policy rewards incumbents and punishes newcomers, the 307 00:20:56,920 --> 00:21:02,240 result isn't just inefficiency, it's economic stagnation. the US 308 00:21:02,280 --> 00:21:07,240 economy has long thrived on competition, creativity, and the 309 00:21:07,240 --> 00:21:10,520 ability of small firms to disrupt giants. 310 00:21:10,720 --> 00:21:15,200 But in a pay to play economy, relationships start to matter 311 00:21:15,200 --> 00:21:18,720 more than productivity. The winners are those who can 312 00:21:18,720 --> 00:21:22,360 afford to lobby, and the losers are those who can't afford a 313 00:21:22,360 --> 00:21:25,840 seat at the table. This cost isn't just borne by 314 00:21:25,840 --> 00:21:30,480 the small businesses, it's paid for by every citizen who suffers 315 00:21:30,480 --> 00:21:34,680 lower economic growth in an economy where old connections 316 00:21:34,680 --> 00:21:39,480 matter more than new ideas. China has been manipulating 317 00:21:39,480 --> 00:21:42,680 trade for decades. Not with tweets or tariffs. 318 00:21:42,680 --> 00:21:47,320 However, it's strategy is long term, structural and quietly 319 00:21:47,320 --> 00:21:50,240 coercive. China's goal isn't to win every 320 00:21:50,240 --> 00:21:54,880 battle, it's to win the war. As an export driven economy, 321 00:21:55,000 --> 00:21:58,920 China is in a much weaker position than the United States. 322 00:21:58,920 --> 00:22:03,320 In any trade conflict, it needs America to buy Chinese 323 00:22:03,320 --> 00:22:06,160 production. Americans, on the other hand, 324 00:22:06,200 --> 00:22:10,680 don't need to overconsume. Yet despite this asymmetry, 325 00:22:10,880 --> 00:22:15,360 China has developed an arsenal of economic weapons with none 326 00:22:15,360 --> 00:22:18,880 more potent than its grip on rare earth materials. 327 00:22:19,520 --> 00:22:24,160 Rare earths aren't actually very rare, but China dominates their 328 00:22:24,160 --> 00:22:28,320 production by selling them so cheaply that no other country 329 00:22:28,320 --> 00:22:32,800 even bothers to compete. It's a quiet monopoly built not 330 00:22:32,800 --> 00:22:36,960 on scarcity but on scale, refinement, efficiency and 331 00:22:36,960 --> 00:22:41,200 environmental tolerance. When China choked off exports in 332 00:22:41,200 --> 00:22:45,320 April, Ford had to halt a factory line in Chicago. 333 00:22:45,720 --> 00:22:49,640 Car makers in India and Japan curtailed production, too, and 334 00:22:49,640 --> 00:22:54,560 the EU scrambled to negotiate. The panic was real, and China's 335 00:22:54,560 --> 00:22:57,800 leverage worked. The contrast with Trump's 336 00:22:57,800 --> 00:23:01,600 approach is striking. Instead of undercutting rivals 337 00:23:01,600 --> 00:23:06,280 like China does, he marked up chip exports, charging a premium 338 00:23:06,280 --> 00:23:08,200 for access. The result? 339 00:23:08,480 --> 00:23:12,040 A market signal to China to build their own chips. 340 00:23:12,680 --> 00:23:17,080 Where China uses price to entrench dominance, Trump uses 341 00:23:17,080 --> 00:23:21,760 price to provoke competition. Donald Trump is often seen by 342 00:23:21,760 --> 00:23:25,920 his supporters as a probusiness Republican, a traditional 343 00:23:25,920 --> 00:23:29,280 conservative and a champion of deregulation. 344 00:23:29,520 --> 00:23:33,400 But his second term economic interventions tell a very 345 00:23:33,400 --> 00:23:37,280 different story. From the golden share in US deal 346 00:23:37,480 --> 00:23:41,600 to the revenue sharing deal with NVIDIA, Trump has repeatedly 347 00:23:41,600 --> 00:23:46,480 inserted executive branch into private enterprise not to 348 00:23:46,480 --> 00:23:52,240 deregulate but to direct action. These moves diverge sharply from 349 00:23:52,240 --> 00:23:55,880 the Reaganite model of limited government and free market 350 00:23:55,880 --> 00:23:58,280 autonomy. And while they don't amount to 351 00:23:58,280 --> 00:24:02,720 nationalization, they do echo the style of leaders who 352 00:24:02,720 --> 00:24:05,080 governed with a much heavier hand. 353 00:24:05,600 --> 00:24:10,080 That's why so many people are comparing Trump to figures like 354 00:24:10,080 --> 00:24:14,760 Hugo Chavez, not as a moral judgment, but as a structural 355 00:24:14,760 --> 00:24:18,480 observation. Like Chavez, Trump has shown a 356 00:24:18,480 --> 00:24:22,760 preference for personal negotiation over institutional 357 00:24:22,760 --> 00:24:26,400 process and for loyalty over market logic. 358 00:24:26,880 --> 00:24:30,680 Chavez used socialism to justify executive control. 359 00:24:31,000 --> 00:24:35,200 Trump uses nationalism. Both cultivated direct 360 00:24:35,200 --> 00:24:39,640 relationships with their support base, bypassed traditional media 361 00:24:39,640 --> 00:24:43,920 channels and cast themselves as the sole interpreters of the 362 00:24:43,920 --> 00:24:47,720 people's will. Trump's interventions may be 363 00:24:47,720 --> 00:24:52,280 lighter and his context far more constrained, but the pattern is 364 00:24:52,280 --> 00:24:55,560 familiar. A populist president using 365 00:24:55,560 --> 00:25:00,200 executive power to shape the private sector in service of his 366 00:25:00,200 --> 00:25:03,640 own goals. This is a huge departure from 367 00:25:03,640 --> 00:25:08,240 conservative orthodoxy, from institutional norms, and from 368 00:25:08,240 --> 00:25:11,920 the American idea that governments should set the rules 369 00:25:12,040 --> 00:25:16,560 but not pick the winners. The NVIDIA deal is by no means 370 00:25:16,560 --> 00:25:19,440 an outlier. It's part of a long list of 371 00:25:19,440 --> 00:25:23,880 presidential interventions in private businesses, from Trump's 372 00:25:23,920 --> 00:25:28,720 golden share in US Steel, to his call for Intel CEO to step down, 373 00:25:28,960 --> 00:25:32,800 to his bizarre announcement that Coca-Cola would be switching 374 00:25:32,800 --> 00:25:36,920 from using high fructose corn syrup to cane sugar in it's US 375 00:25:36,920 --> 00:25:39,680 production after his encouragement. 376 00:25:40,480 --> 00:25:45,080 Each of these examples shares a common thread executive 377 00:25:45,120 --> 00:25:49,840 interference, not in the form of regulation, but in the form of 378 00:25:49,840 --> 00:25:53,560 negotiation. Trump isn't setting rules, he's 379 00:25:53,560 --> 00:25:56,280 cutting deals. And the deals aren't based on 380 00:25:56,280 --> 00:25:59,720 any grand strategy. They're based on the whims of 381 00:25:59,720 --> 00:26:03,800 the president. The golden share in US deal is 382 00:26:03,800 --> 00:26:07,400 especially telling. It mirrors the very mechanisms 383 00:26:07,400 --> 00:26:11,800 the US has long criticized in China, state control through 384 00:26:11,800 --> 00:26:17,400 minority stakes and veto rights under trade law. the US treats 385 00:26:17,400 --> 00:26:21,160 foreign firms with golden shares as public bodies. 386 00:26:21,400 --> 00:26:25,160 Now, by its own definition, it's created one of its own. 387 00:26:25,520 --> 00:26:29,840 The NVIDIA deal may be without precedent, but it may not be the 388 00:26:29,840 --> 00:26:33,840 last of its kind. Treasury Secretary Scott Bescend 389 00:26:34,000 --> 00:26:38,240 has already floated the idea of rolling out similar revenue 390 00:26:38,240 --> 00:26:41,360 sharing arrangements to other industries. 391 00:26:41,520 --> 00:26:45,960 What began as a one off chip deal could become a template, a 392 00:26:45,960 --> 00:26:50,160 new model of executive capitalism where export access 393 00:26:50,160 --> 00:26:54,200 is monetized and national security becomes negotiable. 394 00:26:54,800 --> 00:26:59,120 If this model expands to biotech, aerospace or energy, 395 00:26:59,320 --> 00:27:03,920 the implications are profound. America's global leadership has 396 00:27:03,920 --> 00:27:08,800 long rested on principles, rule of law, institutional process, 397 00:27:08,960 --> 00:27:13,440 and strategic coherence. This new model risks replacing 398 00:27:13,440 --> 00:27:17,360 all three with a presidentially negotiated price tag. 399 00:27:18,080 --> 00:27:22,280 Trump's defenders hailed a deal as a masterstroke, a way to 400 00:27:22,280 --> 00:27:25,520 monetize, leverage and outmanoeuvre China. 401 00:27:25,800 --> 00:27:28,480 But even they must ask at what cost? 402 00:27:28,640 --> 00:27:32,200 And what happens when the next president, who Trump supporters 403 00:27:32,200 --> 00:27:34,760 may not like, wants a bigger cut? 404 00:27:34,960 --> 00:27:38,040 Or when foreign governments retaliate with their own 405 00:27:38,040 --> 00:27:41,280 executive tolls. Thanks for tuning into this 406 00:27:41,280 --> 00:27:44,120 week's podcast. If you found it interesting, I'd 407 00:27:44,120 --> 00:27:47,960 really appreciate it if you could write a short review on 408 00:27:47,960 --> 00:27:51,880 whatever podcasting app you use to help the channel grow. 409 00:27:52,400 --> 00:27:55,520 Thanks as always to my supporters on Patreon whose 410 00:27:55,520 --> 00:27:58,080 contributions make the podcast happen. 411 00:27:58,320 --> 00:28:00,840 Have a great week and talk to you again soon. 412 00:28:01,080 --> 00:28:01,440 Bye.