US President Donald Trump has threatened to impose tariffs of up to 300% on semiconductor imports, exempt from foreign companies committed to manufacturing in the US.
Trump has cast the proposed tariffs as a way to encourage investment in the US, but experts say it could disrupt the global supply chain and be punished by companies already making tips in the US.
What are the details of Trump’s plans?
No details have been made since Trump announced plans for a 100% tariff at the White House event on August 7th.
The US president said exemptions would be provided to companies building US research or manufacturing facilities, but said tariffs could be applied retroactively if they did not follow planned investments.
“For some reason, you’re going to say you don’t build, then we’ll go back and add it up, accumulate it, charge you and pay you at a later date, and that’s a guarantee,” Trump told reporters.
On Friday, Trump told reporters in Air Force 1 that more details will soon be released, with tariffs likely to be much higher than previously proposed.
“We’re going to set tariffs next week for steel and On, we’ll set them for chips and semiconductors, the next week, the next week,” Trump said to meet Russian President Vladimir Putin on his way to Alaska.
“I have a rate that’s 200%, 300%,” he added.
Why does Trump want to impose tariffs on chip imports?
Trump wants to impose tariffs on chips for several reasons, but the main thing is to resupply investment and manufacturing in the US, said G Dan Hutchison, Canada’s vice-chair of technical visits.
“The main goal is to reverse the disadvantages of manufacturing costs in the US and turn it into advantages. We focus primarily on companies that are not investing in the US,” Hutchison told Al Jazeera.
“The exclusion is negotiable for an entity that aligns with his goal of bringing manufacturing back to the US.”
More broadly, the tariff is intended to address the US’s reliance on imported semiconductors. It also aims to strengthen Washington’s position in its ongoing rivalry with China, another chip manufacturing powerhouse.
Both issues are bipartisan concerns in the US.
Earlier this year, the Trump administration launched a Section 301 investigation into alleged unfair trade practices in China’s semiconductor industry and an investigation into the national security impact of chip imports using foreign chips and US reliance on finished products.
Who is affected by tariffs?
Foreign tech giants, such as Taiwanese Semiconductor Manufacturers (TSMC) and South Korea’s Samsung, will not be affected by tariffs.
It is not so clear how the measure will affect other companies, including Chinese chipmakers, who face barriers to US investment from both US and Chinese regulators.
Yongwook Ryu, an assistant professor at the Lee Quang Yi School of Public Policy in Singapore, said the tariff could be used as leverage by the US to negotiate the proportion of so-called “mutual tariffs” in China.
The US has imposed a blanket tariff of 10-40% on most trading partners since August 7th, but negotiators still have a comprehensive trade agreement with Beijing.
“In my view, mutual tariffs generally aim to address the issue of the US trade deficit and re-introducing manufacturing to the US, while product-specific or sector tariffs (such as semiconductors) aim to fulfill the strategic goal of strengthening US technological hegemony and contain China.
What is the value of US chip imports each year?
The United Nations Enterprise Institute reported that in 2024 the US imported approximately $400 billion in chips.
Imports came mainly from Taiwan, Malaysia, Israel, South Korea, Ireland, Vietnam, Costa Rica, Mexico and China, but experts say the data doesn’t have a full picture of the chipping flow in and out of the US.
Chips can cross the boundary multiple times when manufactured, packaged or added to a finished product.
Chip War: The Fight for the World’s Most Important Technology Author Chris Miller estimates that in 2024, another $50 billion worth of chips entered the United States through products such as smartphones, auto parts and home appliances in countries such as China and Vietnam.
Miller also estimates that a “slight portion” of US chip imports were manufactured in the US and then sent abroad for packaging, and was then reimported, and subsequently reimported.
“Many of the chips imported from major trading partners such as Mexico, Malaysia, and Costa Rica could actually be manufactured by US companies such as Texas Instruments and Intel.
Why is tariffs a concern for the global chip industry?
Trump’s tariff plans injected even more uncertainty into an industry that is already working on the administration’s drastic efforts to rearrange global trade.
“It is unclear whether the US government has the capacity to effectively implement this. There is no actual guidance in terms of what these tariffs will look like,” Nick Maro, lead analyst for global trade at the Economist Intelligence Unit, told Al Jazeera.
The White House has not yet provided details on whether customs duties will apply to chips originally made in the US and chips included in finished products.
If the latter is included in the tariff plan, the fallout is Electronic devices, home appliances, automobiles, automotive parts.
Miller said that among the people most affected by tariffs will be consumers in the US and elsewhere.
“Initially, most costs are paid by the company, while consumers pay the majority of the costs in the long run,” he said.
