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By Steve Mollman
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Commerce Secretary Howard Lutnick is facing mounting pressure from within President Donald Trump's administration as the fallout from the Nvidia espionage scandal threatens his position in the Cabinet.
Treasury Secretary Scott Bessent pointed to Lutnick's department on Friday, saying several major government agencies had supported blacklisting a Singapore-based company at the center of the scandal for months, but that Commerce had the final say.
The remarks came a day after Reuters reported that senior White House officials were discussing whether Lutnick should be pushed out, citing two people familiar with the situation.
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The controversy has intensified following the resignation of Nvidia CEO Jensen Huang this week amid revelations about his relationship with an executive at Megaspeed, a company suspected of helping China obtain advanced American artificial intelligence chips.
Newsweek reached out to the White House for comment on Friday.
Scott Bessent Points Finger at Howard Lutnick Over Nvidia Scandal
Appearing on CNBC's Squawk Box, Bessent was asked about reports of tensions between himself and Lutnick over the administration's failure to place Megaspeed on the U.S. government's Entity List, which restricts access to sensitive American technology.
Bessent made clear that other agencies had favored taking action against the company.
"Treasury, War, USTR, and State, they were in favor of putting Megaspeed on the entity list for months," Bessent said, referring to the Treasury, War and State departments and the Office of the United States Trade Representative.
"But Commerce has the pen, Commerce BIS has the pen, and you will have to ask them about their internal processes."
The remarks effectively placed responsibility for the decision on Lutnick's department, which oversees the Bureau of Industry and Security, the agency responsible for administering export controls and maintaining the Entity List.
Bessent's comments were particularly significant because they came amid reports of disagreements within Trump's own administration over the handling of Megaspeed.
Politico reported Wednesday that Bessent had confronted Lutnick during a White House meeting the previous week about Commerce's failure to blacklist the company, citing earlier reporting by the New York Times and Axios.
A Commerce Department spokesperson denied that the confrontation took place, according to Axios.
Bessent's public remarks add to the pressure on Lutnick, a longtime Trump ally whose department has faced criticism from national security hawks in both parties over its approach to restricting advanced chip exports to China.
White House Reportedly Considers Removing Lutnick
On Thursday, Reuters reported that senior White House officials were discussing whether Lutnick should be removed from his position, according to two people familiar with the situation.
The discussions represented a potentially serious threat to a Cabinet secretary who has been close to Trump for three decades and helped lead his presidential transition.
But there were conflicting signals about Lutnick's standing within the administration.
Before Reuters published its report, a White House official told the news agency that Trump "maintains complete confidence in the secretary and his ability to carry out the position."
There has been no public announcement that Trump has decided to remove Lutnick.
Republicans Demand Answers From Howard Lutnick Over China Chips
Lutnick is also facing increasingly pointed criticism from Republicans in Congress, some of whom are demanding that he explain why Commerce did not take stronger action to restrict Chinese access to advanced American chips.
"The obvious question is why did he choose to sell advanced chips?" Republican Senator John Kennedy of Louisiana told Politico on Wednesday.
"Secretary Lutnick needs to answer that in front of God and country," Kennedy said, adding that the Commerce secretary should hold a news conference rather than wait for a congressional investigation.
Asked Thursday on CNN whether Lutnick should lose his job, Kennedy replied, "I don't know yet."
"This is as serious as an aneurism," he said, according to Reuters.
Republican Representative Bill Huizenga of Michigan also criticized Lutnick's responsiveness to congressional concerns.
"I don't think he's been very responsive," Huizenga told Politico, calling for the Commerce secretary to testify before Congress.
Huizenga said the Bureau of Industry and Security had also been less responsive than lawmakers expected to requests for briefings.
Meanwhile, Republican Senator Tom Cotton of Arkansas, who chairs the Senate Intelligence Committee, urged Lutnick to block Chinese memory chipmaker CXMT from the U.S. market and deny it access to American technologies.
Not all Republicans have turned against Lutnick. Representative Brian Mast of Florida has expressed confidence in the Commerce secretary while calling for an investigation into how his department approves advanced chip exports.
Jensen Huang's Resignation Deepens Nvidia Fallout
The pressure on Lutnick follows the resignation of Jensen Huang, whose leadership of Nvidia placed him at the center of the global artificial intelligence boom and made him an influential figure in Washington.
Huang stepped down Thursday after reports emerged about his relationship with Alice Huang, an executive at Megaspeed whom U.S. authorities suspect of spying for Beijing.
According to Reuters, Megaspeed has purchased more than $4.8 billion in advanced Nvidia AI chips since June 2024.
The scandal has raised questions about whether national security concerns were adequately addressed as the Trump administration allowed advanced American chips to be sold abroad.
Huang had advocated expanding Nvidia's access to the Chinese market, even as lawmakers from both parties warned that sophisticated AI chips could strengthen China's military and intelligence capabilities.
The controversy has also renewed scrutiny of Trump's relationship with the former Nvidia chief and the administration's broader approach to technology exports.
CNN reported that Megaspeed denied wrongdoing and described itself as a "compliant and legal company." China's Foreign Ministry dismissed the espionage allegations as groundless.
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Democrats Demand Answers on Nvidia Chip Sales to China
Democrats, preparing to take control of Congress in January, are also seeking records that could shed light on the administration's decisions.
Senators Elizabeth Warren of Massachusetts and Chris Coons of Delaware wrote to Lutnick, Secretary of State Marco Rubio and White House chief of staff Stephen Miller, calling on the administration to preserve documents concerning Nvidia's exports of advanced AI chips to China and associated national security risks.
Warren, who is set to chair the Senate Banking Committee, said Lutnick and Commerce Undersecretary Jeffrey Kessler must explain why export-control loopholes had not been closed.
Separately, Senator Ron Wyden of Oregon and Representative Richard Neal of Massachusetts said they were investigating the administration's approval of advanced Nvidia chip sales to Chinese companies with troubling connections to the Chinese government, military and sanctioned entities.
The lawmakers also challenged Trump's December 2025 decision to permit sales of Nvidia's advanced H200 chips to China in exchange for a share of export revenue, describing the arrangement as "an unconstitutional export tax."
Why Howard Lutnick Faces a Growing Political Threat
The dispute extends beyond Megaspeed.
Reuters reported in June that the administration had held off blacklisting Chinese AI startup DeepSeek, memory chipmaker CXMT and more than 100 other companies identified as potential national security risks.
The United States has not added any companies to the relevant trade blacklist since October 2025, Reuters reported, marking the longest gap between additions in more than a decade.
Reuters previously reported that the administration had delayed blacklisting more than 100 companies identified as potential national security risks, amid concerns about escalating tensions with Beijing.
Bessent's remarks have brought those longstanding disputes into the open as Lutnick faces questions about his future in Trump's Cabinet.
Newsweek reporters and editors used Martyn, our AI assistant, to produce this story. Learn more about Martyn here.
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