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US President Trump announced plans to impose tariffs on semiconductors, with the official announcement expected early next week. This move is part of his broader strategy to implement aggressive tariffs to support US manufacturing.
Global semiconductor stocks might have to brace for supply chain and operations disruptions and high costs as these tariffs could impact major tech stocks.
Tariffs Announcement to Support US Chip Production
President Trump stated during an interview with CNBC, that the US will be announcing new tariffs on semiconductors and chips in order to boost production in the US. He also emphasized the importance of domestic chip production. President Donald Trump also said he will impose a 100% tariff on imports of semiconductors and chips, but not for companies that are building in the United States.
The announcement was made due to an investigation from the Commerce Department where they found out that the semiconductor market is generating nearly $700 billion in global sales every year. ⁽¹⁾
The US produces 10% of the world’s chips, even though they allowed most global chipmaking companies to operate in the US. The 2022 CHIPS and Science Act has allocated $52 billion in order to boost US semiconductor manufacturing, where major semiconductor companies such as Intel and Taiwan Semiconductor Manufacturing Company (TSMC) received funding and formed partnerships. TSMC has committed an investment of at least $100 billion for four years in US chip plants, alongside an investment of $100 billion from Apple ⁽²⁾
Industry Implications and Semiconductor Landscape
The semiconductor industry is navigating through a challenging year, as the Trump Administration has repealed Biden-era AI chip exports in May. Those rules had established a country-specific, multi-tier approach to restricting chip exports based on national security concerns. ⁽³⁾
The Trump administration then released its AI Action Plan in July, which emphasized the need for the US to implement chip export restrictions but hasn’t provided clear details about it. The upcoming tariff announcement could add more uncertainty as the industry awaits clarity on both trade and export policies. ⁽⁴⁾
The majority of advanced semiconductors are made in Taiwan, where TSMC controls production for major tech companies such as Nvidia, Apple, Qualcomm and AMD. Trump’s tariffs could disrupt supply chains for US companies that rely on these imported chips, especially nowadays, as demand for semiconductor products has surged due to AI growth. Imports from Taiwan face a 20% tariff rate which was imposed this week. ⁽⁵⁾
Historical data indicates that during his first term, the US trade war with China has widened China’s trade surplus with the US, which could question the effectiveness of Trump’s tariff-heavy approach. ⁽⁶⁾
Tariff Strategy
President Trump’s tariff strategy extends beyond semiconductors, as he announced that pharmaceutical imports could face a tariff rate of 250%, which was higher than the previous rate of 200%. This was due to an executive order that imposed tariffs on imports from many countries, especially the US’s trade partners, in order to strengthen US production and boost exports. However, Trump has removed some electronic products such as phones and computers from a 125% tariff rate on Chinese imports and a 10% global baseline tariff. ⁽⁷⁾
Trump’s tariffs on semiconductors and chips indicate that the president is committed to build more production plants in the US as he continues to push for a boost in domestic production. However, with heavy reliance on imported chips and small domestic production, the tariffs on semiconductors could cause supply chain issues which could raise costs for US tech companies.
