The clash had been building for months. In May, senior officials were shown a classified warning involving Nvidia chief Jensen Huang and Alice Huang, a Megaspeed employee whom U.S. intelligence suspected of acting as a Chinese agent. Officials including Treasury Secretary Scott Bessent and national-security aides subsequently pressed Commerce to act against Megaspeed, which was accused of diverting advanced U.S. chips to China.¹

By the fall of 2025, the pressure had hardened into a sustained internal campaign. Sources said Commerce Undersecretary Jeffrey Kessler was repeatedly warned about Megaspeed but deferred to Lutnick, calling it “a decision for the secretary.” They portrayed Lutnick as having spent the past year undoing attempts to hold the company accountable, largely out of concern that blacklisting it could escalate a trade war with Beijing.²

The dispute burst into the open at a Situation Room meeting on Thursday after the midterm elections. Bessent asked why Megaspeed was not on the entity list, according to accounts from officials briefed on the meeting. Lutnick’s initial answer — “I don’t know. I’ll look into it” — drew derision from one source, who said he had long resisted action after receiving the intelligence memo.²

Other officials — including Marco Rubio, Pete Hegseth and Jamieson Greer — backed Bessent’s push, sources said. Trump then called Elon Musk and agreed to proceed; Musk supported imposing controls, while Lutnick warned the move “will start a trade war with China.” Trump’s instruction was blunt: “Let’s get it done.”¹

Yet the decision still had not been carried out, according to the accounts. Commerce spokesperson Kristen Eichamer denied that Bessent confronted Lutnick and did not immediately address the wider allegations. The impasse underscores a larger contradiction: Trump has approved tougher action several times, even as his administration has also eased sales of Nvidia’s older H200 chips to China.¹