The problem with operating in China is that the rule of law’s very weak where it exists at all. Foreign entities (domestic firms too, but I’m talking specifically about foreign multinationals here) are subject to Party capriciousness.

In the event the Party decides you’ve done something wrong, nothing requires they prove it, nor is there any guarantee you’ll be given an opportunity to prove otherwise, or even a chance to rectify the situation.

Juxtapose that with the US, where the rule of law’s strong, the rules are established and the burden of proof rests at least partially on the government in the event you’re deemed in violation of those rules.

Donald Trump doesn’t understand this, but he doesn’t do himself any favors in the foreign investment department by undermining the rule of law.

That’s some sociopolitical context for Beijing’s broadside against Nvidia, which stands accused of violating China’s antitrust laws, such as they are. The ruling, issued Monday by The State Administration for Market Regulation, the same body that carried out Xi Jinping’s infamous anti-monopoly crackdown on China’s big-tech behemoths, followed a nine-month investigation.

Beijing offered few details, which is typical. Officially, the inquiry’s related to Nvidia’s acquisition of Mellanox, which authorities in Beijing greenlit in 2020 with one “small” condition: Nvidia couldn’t discriminate against Chinese companies.

That right there — that condition — was a red flag, no Party pun intended. What does and doesn’t count as “discrimination” for the purposes of determining whether foreign entities are treating Chinese firms unfairly isn’t codified anywhere. There are no “experts” on China’s anti-monopoly laws because they aren’t fixed. These sorts of determinations are made on an ad hoc basis by the Party, and it’s obviously not a coincidence that Beijing wrapped up its preliminary investigation on a day when China and the US met in Madrid for trade talks.

If you’re an Nvidia investor — and we all are in one way or another — you can forget about clarity. It’s not forthcoming. China will (or won’t) provide details about the case against the company as it sees fit, will punish the company as it sees fit and will leverage these ginned up allegations in tariff negotiations with the US government which, it should be noted, is increasingly predisposed to the very same sorts of capricious behavior regarding Chinese firms operating in America.

That’s not to suggest Joe Biden and Trump didn’t (don’t) have genuine national security concerns regarding Chinese enterprises. They did (do). But just as it’s becoming difficult to delineate between US industrial policy and China’s state-led, top-down growth model, so too is the line getting very blurry between America’s approach to strategic competition and China’s. Both sides now regularly resort to arbitrary verdicts and ad hoc judgments for the sole purpose of securing leverage in trade talks, with every such adverse determination subject to nullification as part of the tariff logrolling process.

For example, China over the weekend opened a separate, anti-dumping investigation targeting US-made analog integrated circuits, a move which could impact Texas Instruments, among other companies. That, after Trump added nearly two-dozen Chinese companies to a list of firms banned from purchasing US technology. These tit-for-tats are a near daily occurrence.

I should note that China isn’t alone in investigating, formally or otherwise, Nvidia for possible breaches of antitrust laws. France looked into the company along those lines, and so did the Biden administration. But Trump’s transactional nature and penchant for what critics liken to mob-style governance suggests Jensen Huang can insulate the company domestically with payoffs like the controversial arrangement unveiled last month in which Nvidia would pay the US 15% of its sales in China in exchange for an export license.

In any event, Monday’s ruling out of Beijing injects fresh uncertainty into Nvidia’s business prospects in China. Last month, the company’s guidance assumed no sales in the country despite the pay-to-play deal with Trump. In fact, the fine print suggested that arrangement could be an albatross for the company’s operating results. Over the summer, Chinese officials summoned Nvidia to inquire about alleged security backdoors built into chips designed for the Chinese market, and the government subsequently discouraged Chinese firms, and especially SOEs, from using the chips.

Adverse rulings by Chinese regulators against foreign companies are only relevant to the extent the company has designs on operating in the Chinese market in the first place. The issue for Nvidia is that Huang continues to suggest the country’s critical to his company’s growth plans.

In December, when Beijing first announced the investigation, Nvidia said it’d be “happy to answer any questions regulators may have.” “Nvidia wins on merit,” the same statement declared.

That’s great, but — and I’m not telling Huang anything he doesn’t already know — whether you have or haven’t done anything wrong is completely irrelevant when the Chinese government has an interest in insisting you have.

Unfortunately, the US seems to be adopting a similar approach to due process, particularly as it relates to “foreign entities.”