President Trump has indicated that tariffs are a more effective means of revitalizing American industry than relying on vague government spending. He has expressed criticism towards initiatives like the Chips Act, but the semiconductor tariffs currently under consideration at the Department of Commerce should, arguably, necessitate those investments. Without tariffs in place, multinational companies continue sourcing chips from Asia, leaving taxpayer-supported factories at risk of underutilization.
In April, the Commerce Department launched an investigation into semiconductor imports under Section 232, a national security measure. This law mandates that the president impose tariffs if imports could jeopardize U.S. security. Trump’s stance is that economic security correlates with national security, and semiconductors are vital technology in today’s world. He has proposed tariffs that could reach 100% on certain chips, with commercial assessments anticipated by the end of December.
Tariffs aim not just to protect national security but to stimulate demand as well. Without sufficient demand, new manufacturing facilities in the U.S. might become white elephants. Some signals of concern have already appeared: Samsung has postponed its $44 billion Texas factory, citing lack of customers. While Intel, Micron, and others have operations in the U.S., companies like Apple, Dell, HP, and Lenovo still prefer to import chips from Taiwan and South Korea. The idea is that tariffs could alter this dynamic: you either buy from a U.S. facility or face increased costs. That’s the fundamental principle behind chip-for-chip policies.
There are already some exemptions surfacing. For instance, Apple seems to have gained a temporary reprieve for finished goods like iPhones and laptops. Such exceptions can lead to problematic scenarios—like Apple being able to import a MacBook assembled overseas without tariff penalties, while still having to pay tariffs on products manufactured in Texas.
If these exemptions are unavoidable, then strict guidelines must be established. Transactions should be limited to companies actively investing in U.S. facilities, linking exemptions to ongoing projects. This approach should focus on temporary measures until domestic manufacturing capabilities come online. Simply promising future investments without concrete commitments could undermine the strategy.
Most semiconductor imports are actually incorporated into finished products rather than arriving as standalone chips. In 2024, the U.S. imported $140 billion worth of computers, compared to only $40 billion in standalone chips. While raw chips can be taxed, finished items like boards and laptops are still entering the U.S. without taxes, allowing companies to continue purchasing completed products from abroad. This tendency accelerates offshoring and undermines reuse initiatives. Customs regulations should encompass both raw and embedded chips found in finished goods.
Relying solely on the chip method won’t suffice.
Without tariffs, there’s a risk that subsidies for fabs will lead to production in the U.S. while chips are shipped abroad for assembly, merely returning the final products back from Asia. A comprehensive approach would need three key components: incentives for building fabs, Section 232 duties to ensure demand for those fabs, and tariffs on final products to prevent an influx of completed goods within the U.S. Why incur duties on a motherboard when you can import an entire computer without restrictions?
This three-pronged strategy mirrors how China has captured the global market. By blending incentives with protections, it has developed a robust domestic supply chain—this dependence is partially why the U.S. relies heavily on China for manufactured goods.
The Commerce Department should remain vigilant about sectors like medical devices, which rely on chips yet are still produced in the U.S. Section 232 does allow for some flexibility, but this needs to be managed carefully.
The takeaway is clear: chips are integral to everything, from smartphones to medical devices to military aircraft. Safeguarding the semiconductor supply chain is closely tied to both national and economic security in the United States.
Tariffs are not a blunt instrument; they represent targeted efforts to disrupt an Asia-centric manufacturing model. When paired with incentives from the Chips Act, they convey a clear message to global tech companies: invest in the U.S. if you want to access the American market. That’s how Washington aims to disrupt the Asian dominance in manufacturing. If this isn’t achieved, the U.S., which historically innovates while relying on Asia for production, risks falling behind.
The Commerce Department must ensure these tariffs are robust, straightforward, and free of loopholes. Coupled with the tax incentives from the Chips Act, the tariff strategy serves as a way to maintain leadership in crucial future industries.
