Commerce Secretary Howard Lutnick repeatedly blocked efforts to impose export controls meant to stop advanced Nvidia AI chips from reaching China, according to Axios, which cited six sources, some of whom were present for the discussions.
The report says President Trump personally approved taking action on three separate occasions — in May, August, and again on November 5 — but Lutnick stalled each time.
The controversy centers on Megaspeed, a company suspected of diverting Nvidia chips to China, and on Alice Huang, a woman administration officials suspect of ties to Chinese intelligence. A highly classified memo on Huang, reportedly drafted by Secretary of State Marco Rubio, was circulated to administration officials in May. RedState has confirmed the memo reached some of Trump’s advisors, but could not confirm it reached Trump himself.
Shortly after that memo circulated, Treasury Secretary Scott Bessent, Director of National Intelligence Jay Clayton, Secretary of War Pete Hegseth and White House officials pressed Lutnick and Commerce Undersecretary Jeff Kessler to act. According to a source, “they were refusing.” Kessler oversees the Bureau of Industry and Security, the Commerce division responsible for enforcing export controls.
A Confrontation in the Situation Room
Matters came to a head last Thursday in the White House Situation Room. With Hegseth and Rubio present, Bessent confronted Lutnick directly: “How come Megaspeed isn’t on the entities list?”
Lutnick reportedly stammered before answering, “I don’t know. I’ll look into it.” One source familiar with the dispute called that answer “bullshit,” noting Lutnick had sat on the issue since he was personally handed Rubio’s memo.
Lutnick then said he would need to check with the president. That response alarmed officials who said Commerce had promised action before, only for nothing to follow. “He’s stalling it out,” one official said, recounting how Lutnick had previously met privately with Trump to talk him out of imposing the controls. Another official said, “This is an ongoing concern with Howard and this issue.”
Because the pattern had repeated itself, one attendee reportedly pushed back: “Great, why don’t we do it today?” The group then moved to the Oval Office, where Trump called Elon Musk, who sided with Bessent, Rubio and Hegseth. Lutnick argued the move would “start a trade war with China.” A source said others in the room responded that China was already doing to the U.S. what Lutnick claimed to fear.
With Lutnick the only holdout, Trump decided: “Let’s get it done.” But once the meeting broke up, Lutnick reportedly tried another delay: “I’ll develop some options and come back.” According to a source, the response was blunt: “No, no, the decision’s been made. Go fucking execute.” As of this report, it still hadn’t happened.
A Commerce Department spokesperson has denied the confrontation took place. As of Wednesday, Commerce had not added a single company to the Entity List in more than a year.
Parallel Investigations
The New York Times separately reported that Kessler halted a Commerce investigation into Megaspeed after Nvidia intervened. The Justice Department has since taken over that investigation.
Bloomberg reported Thursday that the U.S. Attorney’s office in Manhattan is leading a probe focused on Alice Huang and allegations she helped smuggle Nvidia-powered servers made by Super Micro into China. Super Micro co-founder Yih-Shyan “Wally” Liaw and two others were already indicted in March on charges of conspiring to ship Nvidia-powered servers to a Southeast Asian company for diversion to Chinese customers. Liaw has pleaded not guilty and left the company. Super Micro itself is not a defendant and says it is cooperating. It is unclear whether the Manhattan probe connects to existing chip-smuggling cases.
The Justice Department is separately investigating Megaspeed International, Huang’s former company, over suspected chip smuggling; Megaspeed denies wrongdoing. Semafor reports there is also an antitrust investigation into Nvidia underway.
Attorney General Todd Blanche, who was not in charge when these investigations began, downplayed the matter at an unrelated press conference Thursday, saying, “I don’t have concerns with the Commerce Department.”
The dispute has exposed a visible rift inside the administration over how aggressively to police chip exports to China.
