By Andrew C. McCarthy
Saturday, December 13, 2025
Is there any vestige of conservativism left in the
Republican Party? The challenge of the Trump takeover of the GOP is not just
that the two major parties in the United States are both unabashedly statist in
orientation, but that Trump is taking statism further than a Democratic
administration would dare try to do if there were meaningful conservative
opposition in Congress.
The latest case in point is President Trump’s
announcement that, for a 25 percent piece of the action, the U.S. government
will allow Nvidia to sell advanced H200 microchips to Communist China,
America’s No. 1 geopolitical rival. This is a big markup from August, when
Trump’s pay-to-play national security strategy took a “mere” 15 percent cut on
the sale to Xi Jinping’s regime of less advanced chips — Nvidia’s H20 series
and Advanced Micro Devices Inc.’s (AMD’s) MI308 series — by leveraging the
government’s export control regulations. (Due to supply issues and security
concerns, it is not clear that the August deal got beyond the start of license
issuance by the Commerce Department; the arrangement may now be superseded by
the Trump–Nvidia 25 percent deal.)
The chips are important to China’s drive to best the
United States in dominating the semiconductor industry that is vital to AI
technology, especially for military uses. Our country still enjoys the
advantage in this space. But of course, it wasn’t so long ago that we had a
seemingly comfortable advantage in the mining and processing of so-called rare
earths — only to be overtaken by China, with lots of American help and,
inexorably, to America’s detriment.
This is why it has been American policy for nearly a
decade, including through the first Trump administration, to block China’s
acquisition of advanced chips and related supercomputing and AI tech. That,
needless to say, has become much harder to do now that China can play
rare-earths hardball in trade negotiations.
So why not help Xi acquire even more leverage, right?
For a moment, let’s put the pay-to-play aspect of these
and other Trump administration transactions aside. There are rational arguments
in favor of relaxing export restrictions. Although Nvidia’s H200 series is said
to be a significant advance over its H20 series, the administration’s green
light does not include the company’s more recent Blackwell generation of
computing products, nor the Rubin generation that the Wall Street Journal reports is expected next
year. Ergo, administration officials contend that the U.S. advantage is
maintained. Obviously, even if that’s true, (a) it doesn’t address the threat
posed by the strides China can make with the H200, and (b) it doesn’t provide
any reason to believe the administration won’t be willing to approve sales of
the more advanced models in the not-distant future, if the price is right.
There is also a rationalization posited by Nvidia and its
allies, which are anxious to gain access to the lucrative Chinese market, and
the Trump Commerce Department, whose priority is letting them do just that. The
idea is that providing China with U.S. chips that are better than what China
has, even if it’s not our tech industry’s best stuff, will induce China to
become more dependent on U.S. chips rather than redouble efforts to develop its
own technology. This is not crazy; indeed, it’s redolent of the notion that
commerce with the West would liberalize China. There’s just no empirical reason
to believe it’s true. To the contrary, Xi’s regime continues ruthlessly to
acquire and scrutinize our tech (including by theft when purchase is
unavailable) in order to improve its own — just as, in Deng Xiaoping’s grand
strategy, the Communist Party opened Chinese society’s doors to just enough
commerce to grow its economy while the regime maintained its tyrannical grip.
Of course, all of this magical U.S. thinking — “do the
commerce, and the liberalization and national security boon will surely come
around” — has resulted in both (a) the deep integration of our economy with
China’s (even as President Trump rips Europe for becoming energy-dependent on
Vladimir Putin’s Russia), and (b) China’s evolution into a real geopolitical
rival, such that trade deals (and increasingly, major concessions), though
undesirable, are preferable to intensifying tensions that could turn Cold War II into a hot war that no one in his right mind
wants.
On that score, national-security conservatives, such as
moi, have to concede that even the disentanglement of U.S. and Chinese markets
that we’d prefer has not been U.S. policy. Indeed, it could not become U.S.
policy without a great deal of pain for exporters, for consumers, and for a
debt-crippled government that is in no position to embark on the defense
buildup we desperately need. Implementing prudent financial and security
policies would require adult choices about spending that Washington, in the age
of ascendant statism, no longer makes.
Despite ostensibly vigilant export restrictions and law
enforcement, the government has been allowing technology transfers to China and
not doing nearly enough to thwart technology theft by China. To be fair, then,
while I believe Trump’s elevation of commerce over defense exacerbates our
vulnerabilities, it would be wrong to suggest that he created these
vulnerabilities.
Fine. It will take a lot of tough-minded study and
decision-making to settle on a sound national security strategy. (I don’t
believe the one recently rolled out by the administration fits the
bill, but that’s a story for another day.) China is a formidable foe. We can
reasonably reckon that its collaboration with Russia, Iran, North Korea,
Venezuela, and other authoritarian rogues is an unstable axis (built on
anti-Americanism with little else in common), but we must recognize that it
represents a major challenge. To my mind, supplanting the Reagan
peace-through-strength GOP with a party all too willing to submit to Trump’s
subordination of security to “deals, deals, deals” is a devolution we should
already regret — and that’s apt to get worse.
But now, let’s get back to pay-to-play.
The recent tariff case arguments before the Supreme Court have been a
primer on how separation of powers is supposed to work. Revenue-raising is a
power of Congress, not the president. That is why — notwithstanding the
president’s foolish hyperbole about how much tariff money is pouring into
government coffers — the solicitor general tried so hard to convince the
justices that the tariffs were mere regulation (a power Congress has delegated
to the executive branch), not taxes (a core power of Congress that has not and
perhaps cannot constitutionally be delegated).
It is not enough to say that the president has no
authority to impose a 25 percent tax on Nvidia (which, in effect, is what the
pay-to-play deal is). In this instance, we’re not dealing with a tax on imports
(which is what the tariffs are). What Trump has squeezed out of Nvidia is, in
essence, a tax on exports. Even Congress may not impose export taxes:
They are expressly prohibited by the Constitution (see art. I, sec. 9, cl.5).
Now, some government officials have always wanted to
raise revenue by taxing exports. It was a major issue in the debates over the
Constitution — with none less than George Washington, James Madison, and
Alexander Hamilton in favor. In the end, however, the prohibition won out
because the Southern states (more export dependent and in fear of being
dominated by Northern manufacturing and finance) would have bolted without it.
The Trump administration is far from the first to recognize the remunerative potential.
There have been various schemes over our history to impose costs on exportation
without calling them taxes.
Still, the bottom line remains: The executive branch
has no authority to raise revenue in the absence of a clear delegation by
Congress. And claims that such a delegation is embedded in ambiguous
statutory text ought to be viewed with skepticism in light of the
constitutional bar against export taxes.
As we saw in the tariff case, the International Emergency
Economic Powers Act gives the president broad regulatory authority. This
includes the power to ban exports altogether in certain situations. If there
are illegal exports after a president has invoked IEEPA, the government can
freeze assets, force sales, and impose fines. There are other provisions in
federal law that, similarly, are enforcement actions — meant to be
punitive and discourage others from violating the law. That is quite different
from government’s taking a piece of the action in lawful commercial
transactions.
In the realm of exports, federal law expressly prohibits
the government (generally, the Commerce Department’s Bureau of Industry and
Security) from collecting fees for considering or issuing export licenses (see Section 4815(c) of export control law in Title 50, U.S.
Code).
More generally, the Anti-Deficiency Act (see Sections 1341 et seq. of Title 31, U.S. Code) has long been
construed to bar the executive branch from augmenting the appropriations it
gets from Congress through revenue-raising devices that Congress has not
authorized (and also, it should be noted, from spending such revenue in a
manner not prescribed by Congress, such as the president proposes to do by giving farmers, beleaguered
by his likely illegal tariffs, a small slice of the tariff pie).
The Government Accountability Office has explained the
non-augmentation principle in its guidance manual (Principles of Federal Appropriations, 3rd Ed., Vol
II (2006), at pp. 6-162-63). The Constitution vests Congress with the power to
determine the funding level for executive agencies; therefore:
To permit an agency to operate beyond
this level with funds derived from some other source without specific
congressional sanction would amount to a usurpation of the congressional
prerogative.
GAO elaborates by citing one of its own rulings (from
2004):
An agency cannot, absent statutory
authorization, operate beyond the level that can be paid for by its
appropriations. An agency may not circumvent these limitations by augmenting
its appropriations from sources outside the government. One of the objectives
of these limitations is to prevent agencies from avoiding or usurping Congress’
‘power of the purse.’
In our constitutional system, the president has no
legitimate power to impose levies on a private corporation as a cost of doing
business. Such an imposition violates both separation of powers and private
property rights — even if the company is willing to be extorted as the price of
government-controlled access to a foreign market.
For Congress, which has a critical part to play in
safeguarding the United States, it makes no sense to put a price tag on
national security. If allowing China to purchase precious technology, which can
dually enhance its military prowess and computing/AI prowess, is detrimental to
vital American interests, that threat is not mitigated by allowing the Treasury
to grab a quarter of the income.
There’s a word for selling one’s virtue if the price is
right, and that word is not security.
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