The 15% government cut on sales of advanced semiconductor chips to China in return for being awarded export licenses constitutes an export tax, and is unlikely to raise substantial revenues, instead potentially cutting across efforts to narrow the U.S. trade deficit, says Oxford Economics. The economic advisory firm characterized the charge, agreed recently by chip manufacturers Nvidia and AMD, as “a surprising move.”

“Although the parties involved have carefully avoided describing this arrangement as an export tax, it amounts to one,” the firm said in a report August 26. “Moreover, U.S. Treasury Secretary Bessent has also floated the idea of export taxes being extended to other industries.”

Oxford Economics estimates that the proposed levy on U.S. semiconductor exports to China would raise at most around $1.5 billion, which is a trivial sum in the context of a U.S. budget deficit of over $2 trillion, according to lead economist Adam Slater. “Even an export tax of 15% on all exports would only raise $300 billion — and probably far less, as it would seriously cut into the level of U.S. exports. We doubt that export taxes will be extended much beyond the semiconductor sector.”

“While a theoretical case can be made for using export taxes to improve a country's terms of trade where it controls a large share of a given market, it's unlikely these conditions apply for more than a small subset of U.S. products,” Slater added. “And in the longer-term export taxes may erode previously dominant market shares by encouraging trade partners to look for other suppliers.”

Oxford Economics was founded in 1981 as a commercial venture with the U.K.’s Oxford University's business college to provide economic forecasting and modelling to U.K. companies and financial institutions expanding abroad.