United States President Donald Trump has threatened to impose tariffs of up to 300 percent on semiconductor imports, with exemptions for foreign companies that commit to manufacturing in the US.
Trump has cast the proposed tariff as a way to drive investment to the US, but experts say it could also disrupt global supply chains and even penalise companies already making chips in the US.
What are the details of Trump’s plan?
Few details have been released since Trump announced plans for a 100 percent tariff at a White House event on August 7.
The US president said exemptions would be given to companies that build research or manufacturing facilities in the US, but tariffs could be applied retroactively if they failed to follow through on their planned investments.
“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,” Trump told reporters.
On Friday, Trump told reporters on board Air Force One that more details would be announced soon and that the tariff could be much higher than previously suggested.
“I’ll be setting tariffs next week and the week after, on steel and on, I would say chips – chips and semiconductors, we’ll be setting sometime next week, week after,” Trump said en route to Alaska to meet with Russian President Vladimir Putin.
“I’m going to have a rate that is going to be 200 percent, 300 percent,” he added.
Why does Trump want to impose tariffs on chip imports?
Trump wants to impose a tariff on chips for several reasons, but the main one is to re-shore investment and manufacturing to the US, said G Dan Hutcheson, the vice chair of Canada’s TechInsights.
“The primary goal is to reverse the cost disadvantage of manufacturing in the US and turn it into an advantage. It’s mainly focused on companies that are not investing in the US,” Hutcheson told Al Jazeera.
“Exclusions are negotiable for entities that align with his goal of bringing manufacturing back to the US.”
More broadly, the tariff is also intended to address the US dependence on imported semiconductors and buttress Washington’s position in its ongoing rivalry with China, another chip-making powerhouse.
Both issues are bipartisan concerns in the US.
The Trump administration earlier this year launched a Section 301 investigation into alleged unfair trade practices in China’s semiconductor industry, and a Section 232 investigation into the national security implications of US reliance on chip imports and finished products that use foreign chips.
Who will be impacted by the tariff?
Foreign tech giants that have already invested in the US, including the Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea’s Samsung, would likely not be affected by the tariff.
It is less clear how the measure could affect other companies, including chip makers in China, where companies face barriers to US investment from both US and Chinese regulators.
Yongwook Ryu, an assistant professor at the Lee Kuan Yew School of Public Policy in Singapore, said the tariff could be used as leverage by the US as it negotiates the rate of its so-called “reciprocal tariffs” on China.
The US has imposed blanket tariffs of 10-40 percent on most trade partners since August 7, but negotiators are still hammering out a comprehensive trade deal with Beijing.
“My view is that while the reciprocal tariffs are generally aimed more at addressing the US trade deficit problem and re-shoring manufacturing back to the US, product-specific or sectoral tariffs [like semiconductors] are aimed at serving the strategic goal of strengthening US technological hegemony and containing China,” Ryu told Al Jazeera.
What is the value of US chip imports each year?
The US imported about $40bn in chips in 2024, according to a report by the American Enterprise Institute, citing United Nations trade data.
Imports mainly came from Taiwan, Malaysia, Israel, South Korea, Ireland, Vietnam, Costa Rica, Mexico and China, but experts say this data does not capture the full picture of chip flows in and out of the US.
Chips can cross borders multiple times as they are manufactured, packaged, or added to finished goods.
Chris Miller, the author of Chip War: The Fight for the World’s Most Critical Technology, estimates that another $50bn worth of chips entered the US in 2024 via products like smartphones, auto parts and home appliances from countries like China and Vietnam.
Miller also estimates that a “substantial portion” of US chip imports are manufactured in the US before being sent overseas for packaging – a labour-intensive process – and then re-imported.
“Many of the chips imported from key trading partners like Mexico, Malaysia and Costa Rica are likely actually manufactured by US firms like Texas Instruments and Intel, which have manufacturing in the US but often have their test and assembly facilities abroad,” Miller told Al Jazeera.
Why is the tariff a concern for the global chip industry?
Trump’s tariff plans have injected further uncertainty into an industry already grappling with his administration’s sweeping efforts to reorder global trade.
“It’s unclear whether the US government has the capacity to effectively enforce this and… there’s not really any guidance in terms of what these tariffs are actually going to look like,” Nick Marro, the lead analyst for global trade at the Economist Intelligence Unit, told Al Jazeera.
The White House has yet to provide details on whether the tariff will apply to chips originally made in the US and chips contained in finished products.
If the latter were included in the tariff plans, the fallout would extend to industries like electronics, home appliances, automobiles and auto parts.
Miller said that it would be consumers in the US and elsewhere who would be among those most affected by the tariff.
“Initially, it appears that most costs would be paid by companies via lower profit margins, though in the long run, consumers will pay the majority of the cost,” he said.
