Trump’s 'pay-to-play scheme' is 'likely unconstitutional' — but here to stay: legal expert

U.S. President Donald Trump looks on, in the Oval Office at the White House in Washington, D.C., U.S., August 14, 2025. REUTERS/Kevin Lamarque

President Donald Trump sent shockwaves through the tech world when he announced an arrangement with computer chipmakers Nvidia and Advanced Micro Devices (AMD) that allows them to sell their chips to Mainland China on the condition that they give the U.S. government 15 percent of the revenue from sales.

Law professor/author Ilya Somin, who teaches at George Mason University in Fairfax, Virginia outside Washington, D.C., is highly critical of this deal in an article published by the conservative website The Bulwark on August 15. According to Somin, the deal is "likely unconstitutional" and "sets a dangerous precedent for unilateral executive imposition of taxes without legislative authorization" — but "may not be challenged in court anytime soon."

"Article I, Section 9 of the Constitution states that 'No Tax or Duty shall be laid on Articles exported from any State,'" Somin explains. "The Supreme Court has interpreted this broadly to require 'not simply an omission of a tax upon the articles exported, but also a freedom from any tax which directly burdens' exports. Trump's appropriation of 15 percent of the two firms' revenue from chip sales to China surely qualifies as such a tax."

The law professor continues, "The Supreme Court has held that the Export Clause 'does not rule out a user fee, provided that the fee lacks the attributes of a generally applicable tax or duty and is, instead, a charge designed as compensation for government-supplied services, facilities, or benefits.' But the payments imposed on the two chip manufacturers pretty obviously aren't user fees, as they are not charges for the use of any government facilities or services."

Somin argues that "the imposition of this unconstitutional export tax must be viewed in the context of Trump's broader effort to usurp the power of taxation from Congress with respect to international trade."

"He has also tried to illegally use the International Emergency Economic Powers Act of 1977 (IEEPA) — a law that does not even mention tariffs — to impose the most extensive tariffs since the Great Depression, potentially costing Americans trillions of dollars in tax payments," Somin warns. "The U.S. Court of International Trade struck down these tariffs in a ruling covering cases brought by five small businesses and twelve state governments; I am co-counsel for the plaintiffs in the former case."

Somin predicts that the Trump Administration will impossible a similar "export tax" on other companies.

"It is also possible that Nvidia or AMD might change their minds and decide to sue in the future," Somin writes. "And if the (Trump) Administration proceeds with plans to impose similar export taxes on other firms, they might sue, even if Nvidia and AMD do not. For the moment, however, it looks like Trump is likely to get away with this export tax power grab. If he continues to do so, that might incentivize him to engage in further 'pay to play' schemes of this type — and to further erode the constitutional separation of powers."

Ilya Somin's full article for The Bulwark is available at this link.