Is the US Imposing Tariff on NVIDIA and AMD's China Sale?

NVIDIA and AMD, leading players in the chip industry, have agreed to share 15% of their China chip sale revenues with the US government to secure export licenses. 

This deal, focusing on GPU and VGA chips like NVIDIA’s H20 and AMD’s MI308, has sparked debates about tariffs, trade policies, and national security. Let’s break down this complex issue and its impact on the chip market.

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Why China Matters for NVIDIA and AMD

China is a key market for both companies. In the fiscal year ending January 2025, NVIDIA earned $17 billion from China, representing 13% of its total revenue. 

AMD generated $6.2 billion in 2024, accounting for 24% of its sales. These figures highlight China’s importance as a revenue driver for chipmakers.

The Chips at the Heart of the Deal

The agreement involves NVIDIA’s H20 AI chip and AMD’s MI308 chip, both designed for artificial intelligence applications. 

These chips are less advanced than those sold in the US, tailored to meet strict export controls. Despite this, they remain highly sought after in China’s booming tech sector.

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Details of the 15% Revenue-Sharing Agreement

To resume sales in China, NVIDIA and AMD agreed to give 15% of their China chip sale revenues to the US government. 

This followed a meeting between NVIDIA’s CEO Jensen Huang and President Donald Trump in early 2025. The US Commerce Department soon began issuing export licenses to enable these sales.

Financial Impact

• Projected Revenue: NVIDIA could sell $15 billion in H20 chips by year-end, contributing roughly $2.25 billion to the US government. AMD’s MI308 sales, estimated at $800 million, would add about $120 million.

• Unique Structure: This revenue-sharing model acts like a tariff but is framed as a condition for export approval, a first for US tech firms, raising questions about future trade policies.

US-China Trade Tensions and Chip Restrictions

In April 2025, the Trump administration halted H20 chip sales to China, citing national security risks. However, the US later reversed this ban, allowing sales under strict conditions. 

This shift reflects ongoing efforts to balance economic interests with security concerns in US-China relations.

Trump’s Broader Tariff Strategy

The deal aligns with Trump’s aggressive trade policies, including threats of 100% tariffs on foreign-made semiconductors unless companies invest in US manufacturing. 

This revenue-sharing arrangement is seen as a diplomatic and financial tactic to maintain US leverage in global tech markets.

National Security vs. Economic Gains

Some experts argue the deal prioritizes revenue over security. Alasdair Phillips-Robins, a former Commerce Department adviser, warned it could weaken national security protections. 

Others fear it sets a precedent, potentially encouraging China to impose similar conditions on foreign firms.

The US Government’s Stance

Commerce Secretary Howard Lutnick defended the agreement, describing the H20 as NVIDIA’s “fourth-best chip” and stating it poses no security risk. 

The goal is to keep Chinese firms reliant on American technology while restricting access to the most advanced chips.

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China’s Response and Market Dynamics

China’s government hasn’t officially commented, but state media criticized the H20 chip, alleging potential security risks like “backdoors.”

NVIDIA firmly denied these claims, emphasizing the safety of its products. This reflects China’s growing skepticism of US tech dominance.

Market Demand and Supply

• High Demand: China’s AI chip demand is massive, with NVIDIA holding 600K–900K H20 units against a 1.8M unit market need. AMD’s MI308 chips also face strong demand.

• Profit Challenges: The 15% revenue cut could squeeze profit margins, forcing NVIDIA and AMD to rethink pricing or absorb costs to stay competitive in China.

Implications for the Global Chip Industry

This revenue-sharing model is unprecedented and could reshape how tech firms navigate global markets. Critics call it a “political tariff” disguised as an export condition, potentially influencing future US trade deals with other industries or countries.

Balancing Profit and Regulation

NVIDIA and AMD face a delicate balance: accessing China’s lucrative market while complying with US regulations. 

The deal boosts short-term sales but ties the companies to government oversight, complicating their global strategies and long-term planning.

What’s Next for Chipmakers?

The tariff agreement highlights the growing intersection of technology, trade, and geopolitics. As US-China tensions persist, chipmakers must navigate a complex landscape of regulations, market demands, and political pressures. 

This deal could prompt other nations to adopt similar revenue-sharing models, further complicating global trade.

Read Also: The US Will Impose This High Tariff on EU! Here is How Much It Is

Conclusion

The 15% revenue-sharing deal isn’t a traditional tariff but functions like one, blending trade policy with national security. It allows NVIDIA and AMD to tap into China’s market but raises concerns about long-term implications. 

As the US and China continue their tech rivalry, this agreement could redefine how chipmakers operate globally, balancing profits with geopolitical realities.

FAQ

Is the 15% revenue share a tariff?

Not officially. It’s framed as an export license condition but works like a “political tariff” on China sales.

Which chips are affected by this deal?

NVIDIA’s H20 AI chip and AMD’s MI308—both China-specific, lower-spec AI models under export controls.

How much will the US get from this deal?

Around $2.25B from NVIDIA’s projected H20 sales and $120M from AMD’s MI308 sales by year-end.

Why are these chips in such high demand in China?

China’s AI boom demands millions of GPUs. NVIDIA has 600K–900K H20 units ready—still far below market needs.

Could this model spread to other industries?

Yes. Experts warn it could set a precedent for “revenue-share diplomacy” in future global trade deals.

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