Trump proposes tariffs based on chip quantity in imported products
The global tech landscape is once again on high alert as the White House unveils a controversial new policy. Donald Trump is considering imposing tariffs on imported electronic devices based on the number of chips they contain, a move that could have significant implications for everything from electric toothbrushes to high-end laptops, including CPUs and GPUs, among countless other products.
This proposal is presented as a strategy to encourage multinational corporations to shift part of their production back to the United States. The administration argues that reliance on foreign semiconductors presents both economic and national security risks, a concern that appears to have come to light only recently.
Trump tightens the grip on the tech sector with tariffs based on chip quantity or equivalent value percentage
In recent months, Trump has already intensified his trade policy, implementing a 100% tariff on brand-name medications and a 25% tariff on heavy trucks, along with varying rates on chips based on their country of origin.
Now, the focus has shifted to semiconductors and all products that incorporate them, representing a rather broad and somewhat heavy-handed approach, described as “using a sledgehammer to crack a nut”. According to sources cited by Reuters, the Department of Commerce is considering a standard 25% tariff on chip content in most imported devices, with a potential 15% on products from Japan and the European Union, which would be a significant blow to these nations.
This tariff structure would not be uniform; Washington is exploring a dollar-for-dollar exemption scheme for companies that invest in domestic factories, provided that at least half of their production is relocated to the U.S.. This creates a dual challenge for other countries, as their companies may be forced to relocate production to the U.S. to avoid tariffs, especially if they wish to access the American market.
A blend of tariffs, tax cuts, and deregulation to attract foreign businesses
Despite these proposals, there is a lack of clarity on how these exemptions would be implemented, or whether the White House would agree to any kind of flexibility. In fact, Trump has shown reluctance to allow any form of exemption, even in sensitive sectors like chip manufacturing tools. This uncertainty leaves the effectiveness of the proposed measures in question.
Trump claims that this approach combines tariffs, tax cuts, deregulation, and a push for domestic energy as a formula to bring critical manufacturing back to the U.S. However, there are existing concerns regarding energy supply, particularly with the surge in AI data centers and the growing number of companies eager to establish manufacturing plants.
Furthermore, the Federal Reserve has already hinted at a potential rise in inflation, which could lead to higher prices for products in the U.S., given that not all companies can establish factories overnight.
Interestingly, major foreign manufacturers like TSMC and Samsung, who do not meet the 50% local production requirement, are heavily invested in the U.S. market, having committed billions of dollars. With Trump's proposed tariffs based on chip quantity per product, they may constantly find their investments insufficient.
Is Trump tightening the noose too much? It seems that the measures will not cease anytime soon, and semiconductor tech companies are becoming weary of continually meeting the limits imposed by the administration. There may come a point where they decide to scale back their investments or focus their efforts on other markets instead.
They might also be awaiting a ruling from the U.S. Supreme Court regarding whether Trump overstepped his authority with these tariffs, which have been invalidated and challenged by the White House.
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