TOI correspondent from Washington: For commerce secretary Howard Lutnick, the roadmap for major trade deals was simple: countries like India and Brazil had to be “fixed” to set an example to the world; specifically, PM Modi needed to make a placatory phone call to President Trump; and China needed to be kept dependent on the United States. Except, when it came to selling American AI chips to Beijing, it turns out he was less a hawk and more a dove, like Nvidia’s Jensen Huang.Allegations from Lutnick’s own cabinet colleagues that the US commerce department sat on recommendations from other US agencies to sanction China-linked Megaspeed, now accused of spiriting advanced Nvidia AI chips to Beijing via a honeytrap operation, has suddenly put the commerce secretary’s job on the line. In a stunning development on Thursday, Treasury Secretary Scott Bessent publicly threw Lutnick under the bus, disclosing that the Departments of Treasury, War, USTR, and State were all in favor of putting Megaspeed on the “entity list” for months, “but commerce has the pen.”“You will have to ask commerce about their internal process…I am frustrated when President Trump made it very clear that China should not receive any Nvidia chips above H100s….any leakage is very frustrating because it hurts our great companies and gives the Chinese an advantage,” Bessent told reporters in more public dissonance in the Trump cabinet.Despite occasionally presenting himself as a China hawk, Lutnick’s philosophy when it comes to AI chips was hardly a secret and he had articulated it with characteristic bluntness over months: America, he argued, should sell enough advanced chips to Chinese developers to get them “addicted to the American technology stack.” The idea, which was also advanced by Nvidia’s Jensen Huang, was to keep the US ahead technologically while ensuring that China continued to use American chips, software, and infrastructure rather than letting it build an entirely independent ecosystem that could eventually challenge US primacy.The problem with Bessent’s dumping on Lutnick though is that President Trump himself previously approved sales of certain Nvidia processors, including H200 chips, to China, broadly reflecting Huang’s and Lutnick’s argument that America should compete commercially rather than surrender the Chinese market altogether. At the same time, Trump also reportedly authorised crackdowns on suspected chip diversion on three occasions this year, only for implementation to stall, reflecting the conflict between backing the commercial logic of selling chips and the national-security imperative of preventing their diversion.Trump, for his part, has not yet abandoned Lutnick amid growing bipartisan Congressional scrutiny. The White House has declared that the President maintains “complete confidence” in Lutnick, praising his contribution to America First trade policies, tariffs and manufacturing investments. But the President’s own position on China chips is hardly consistent with the tough line being demanded by national-security officials.Beyond the strategic dimension of Washington trying to maintain the technological upper hand, the issue is becoming a political hot potato domestically with Democratic lawmakers, chuffed by the mid-term election verdict, jumping on the issue. Republican Senators are also emboldened by results that have weakened Trump. “This whole thing is an intergalactic freak show….how do they know the chips went to the company (Megapseed) and not to the Communist Party of China?’ asked Louisiana Republican John Kennedy.More fireworks and disclosures are expected ahead of Congressional hearings in the coming weeks. The Republican chairs of three House panels — Foreign Affairs, the Select Committee on China, and Intelligence — have asked Jensen Huang to sit for a joint, closed-door interview on December 1, followed by a public hearing before the Senate Banking Committee on December 3. Lutnick is also scheduled to appear before the Senate Banking Committee on December 10.The latest developments have dramatically raised the stakes for both Lutnick and Huang amid growing infamy for the Nvidia founder and CEO. Reports of Huang having a third extramarital relationship involving another Nvidia employee emerged on Thursday, even as the Wall Street Journal reported on Friday that Huang had privately belittled his successor Colette Kress, describing her as “a deer in the headlights” during a meeting this summer, after she questioned some of his increasingly aggressive investment decisions.Trump, meanwhile, has remained remarkably sympathetic to Huang, even after his departure from Nvidia. In a pre-recorded interview with Stephen Smith aired on Thurday, the President said he had spoken to the embattled icon on Wednesday and that “he’s going through hell,” while describing him as a “tremendous talent” who would somehow land on his feet.
