- Proposed tariff is widely seen as another jab at China. US-China chip tensions remain high, and trade talks are ongoing.
President Donald Trump made waves by announcing his intent to slap a hefty 100 per cent tariff on semiconductor chips imported into the United States from countries that neither manufacture nor plan to manufacture the vital tech components domestically.
Speaking from the Oval Office, Trump emphasised that the measure would cover “all chips and semiconductors coming into the United States.” However, he reassured US allies—and major global manufacturers—that companies already committed or currently building plants on American soil would not be subject to the new levy.
“If, for some reason, you say you’re building and you don’t build, then we go back and we add it up, it accumulates, and we charge you at a later date, you have to pay, and that’s a guarantee,” he declared. Despite the bold language, there was no formal or detailed tariff proclamation, leaving many specifics up in the air.
Details are murky
So who will actually feel the pinch? Details are murky. Taiwanese industry powerhouse TSMC, known for producing chips for most US companies, operates factories inside the United States.
Big-name clients like Nvidia may be able to sidestep increased costs for their US-bound chips, with Nvidia themselves already pledging substantial investments—hundreds of billions of dollars over the next four years—into stateside chip and electronics production.
Context is everything: In 2022, Congress set up a $52.7 billion incentive program to encourage semiconductor manufacturing and research in the US under President Biden’s administration, all five top-tier chipmakers agreed to put factories on American soil.
Despite these efforts, domestic production still only accounted for about 12 per cent of the world’s chips last year—a far cry from the 40 per cent share held in 1990.
A tricky loophole
While Trump didn’t single out specific countries, the proposed tariff is widely seen as another jab at China. US-China chip tensions remain high, and trade talks are ongoing.
This means Chinese chips, particularly those from firms like SMIC and Huawei, likely won’t get a pass. Most such chips entering the US are found inside end devices assembled in China—a tricky loophole.
But here’s a twist: If new tariffs hit only finished chips but not all component parts, they might barely move the needle.
Meanwhile, major chip nations—South Korea, Japan, and the European Union—have negotiated trade deals, seemingly dodging the worst of the new levies. The EU, for instance, reports a single 15 per cent tariff on most exports, from cars to chips to pharmaceuticals.
South Korea and Japan have received US assurances that their chip tariffs will match or beat what others pay, with a likely 15 per cent cap as well.
Where this chip drama goes next will depend on formal action, global supply chain maneuvres, and whether America’s big tech and chip players can keep their promises—and their factories—at home.
