Bessent blames Lutnick’s Commerce Department for not restricting Nvidia chip exports - AP News

The public rift between the Treasury and Commerce Departments over Nvidia export controls signals a shift from strategic deterrence to execution failure. This internal friction forces chipmakers to restructure compliance from passive adherence to active lobbying, significantly increasing operational costs and eroding margins. Technologically, inconsistent enforcement accelerates "chip fragmentation," compelling Nvidia to localize HBM and advanced packaging while stimulating defensive supply chain expansion in Taiwan, China, and Southeast Asia. Competitors like AMD and Intel will exploit this regulatory vacuum, leveraging flexible compliance strategies to capture restricted markets. Over the next 12-24 months, expect "compliance arbitrage" as firms route through third countries to bypass direct restrictions, prompting the US to enact stricter "long-arm" regulations. This is not merely a bureaucratic power struggle but a failed attempt to balance technological hegemony with domestic industrial interests, ultimately leading to further global supply chain fragmentation and efficiency losses.