[THE VIEW] Trump's "Art of the Deal" Shakes the Market

Profit Sharing and Equity Stakes Beyond the Pretext of National Security
Export Tolls Set a Precedent for Market Disruption

The Donald Trump administration is extending its philosophy of "the art of the deal" into national policy. By using tariffs as a negotiation tool, it seeks to extract favorable trade terms from other countries and employs strategies that directly intervene in corporate management under the pretext of national security and industrial protection. This approach has yielded short-term results, as many countries are now accepting less favorable terms at the negotiation table in the face of overwhelming U.S. economic power and market dominance.

However, recent developments in the semiconductor industry have raised concerns that such pragmatism could undermine the very foundations of the free market economy. The administration's unprecedented demand for profit-sharing from Nvidia's export earnings, as well as its ascension to Intel's largest shareholder, go beyond simple regulation and signal a shift toward a state capitalism model in which the government directly intervenes in core corporate management and profit distribution.

The measure imposed on Nvidia is both shrewd and unprecedented. Whereas previous administrations imposed a blanket ban on advanced semiconductor exports to China on national security grounds, the Trump administration has chosen to negotiate. In exchange for allowing exports of low-end artificial intelligence (AI) chips to China, the administration is demanding a 15% cut of the related sales as a sort of toll. From the administration's perspective, this is a rational approach: rather than a total ban, controlled exports ensure U.S. companies can maintain revenue opportunities, while the government secures additional tax income and puts a check on China's technological advancement.

However, this sets a dangerous precedent. The justification of national security is being transformed into a new revenue model for the government, and it potentially violates the constitutional principle that prohibits federal taxation of exports. An even greater concern is that a new era could dawn in which every technology company must negotiate profits with the government in order to obtain export licenses. This essentially replaces market mechanisms with political bargaining.

Semiconductors have become a "bargaining chip" for former President Trump. Despite short-term gains, controversy is growing over government intervention that disrupts market principles. Image generated by ChatGPT

The Intel case is even more shocking. By converting subsidies under the CHIPS and Science Act into equity, the U.S. government secured a 10% stake in Intel, becoming its largest shareholder. President Trump has touted this as a great deal for taxpayers, but the market's reaction has been far from positive. The administration's logic is clear: to secure leadership in the semiconductor industry, which is vital to national security, and to share the achievements of companies supported by taxpayer money with the public.

This also reflects a sense of urgency not to fall behind in the technological competition with China. In reality, with Taiwan's TSMC and South Korea's Samsung Electronics leading in advanced semiconductor manufacturing, the U.S. government's direct intervention can be interpreted as a demonstration of its determination to support domestic companies.

However, no management team is free from the influence of a government that is its largest shareholder. Intel's long-term strategy is now more likely to be dictated by political rather than market logic. This could even subject allied companies like Samsung Electronics and TSMC to similar pressures.

There may be clear short-term benefits: protecting domestic companies, securing tax revenue, and gaining strategic advantages. There is also a pragmatic view that some level of state intervention is inevitable in the technological power struggle with China. However, in the long run, this could prove self-destructive. It could undermine corporate autonomy, erode market efficiency, and weaken the driving force of innovation. More importantly, such an approach could accelerate the fragmentation of the global technology ecosystem and ultimately weaken the global competitiveness of U.S. companies.

The more intense the technological hegemony competition becomes, the higher national borders will rise and the greater the role of the state will be. This is the reality of our times. However, that role should not involve destroying market rules or treating companies as spoils of the state. Silicon Valley achieved its current status not through government intervention, but through free competition and innovation. As the government's "visible hand" seeks to determine the future of the semiconductor industry, it remains to be seen whether that hand will truly save the industry.

Park Sungkyu, Professor at Willamette University, USA