President Trump’s potential tariffs on semiconductors are stoking the alarm within the technology sector as businesses support industry-wide ripple effects and competitive position at the global stage.
The Trump administration launched an investigation this week into the impact of semiconductor technology imports on national security. A day after the president suggested tariffs on semiconductors, it could soon come in his broader trade war.
Semiconductors have powered most of the technology products of today’s ecosystem and industry observers, warning consumers that if Trump decides to impose an import tax on chips or the products that host them, they can reduce costs.
“We are pleased to announce that Sean Murphy, vice president of policy at the Information Technology Industry Council (ITI), a trading association.
“It will have ripples and cascade effects across the industry,” he added.
It is still unknown how broad the semiconductor tariffs are.
Commerce Secretary Howard Lutnick proposed earlier this week that tariffs could be applied not only to chips themselves but also to products with chips such as smartphones and computers.
“Depending on how these different categories are defined, we’re talking about potentially very large trade belts, which could have a very profound impact on the economy,” Murphy said.
The Technical Department was thrown into the loop over the weekend when guidance posted by Customs and Border Protection said that around 20 products, including smartphones, computers, routers and semiconductor chips, are exempt from mutual tariffs.
Many major tech companies, like Apple, manufacture and assemble some of China’s most popular products, and charge 125 retaliation fees on US products.
But two days later, Lutnick stoked confusion when he said the exemption was temporary, suggesting future tariffs on semiconductors that also apply to other electronic devices.
The Commerce Department later confirmed Monday that it began an investigation into Section 232 on semiconductor technology that sets the basis for the tariffs Trump chose to impose on chips.
The investigation will investigate how semiconductor technology imports have affected national security and whether public comment is being asked within three weeks.
This has moved towards the competition for artificial intelligence (AI), an emerging chip-powered technology, amid the dynamics of greater competition between the US and other countries, particularly China.
The Biden administration has recently launched a series of export controls on semiconductors to prevent China from using US-made chips in its own AI or chip development, and the Trump administration continues these efforts.
The Commerce Department confirmed Wednesday that it had introduced new export licensing requirements for AI chip maker Nvidia. This is expected to receive a $5.5 billion hit, along with advanced microdevice from rival chipmakers.
“If we look at increased costs, supply chain instability and current market uncertainty, this threatens to weaken Silicon Valley’s competitiveness globally,” says Ahmad Thomas, CEO of the Business Association, representing a wide range of technology companies.
“It describes the increased costs of critical infrastructure associated with next-generation AI, or the additional costs seen around cloud computing and data center components,” he added.
Trump justified the trade war as a way for businesses to move manufacturing to America, but people in the tech sector have repeatedly warned that such a transition would cost years of money.
Nvidia announced on Monday that it will invest $500 billion in the construction of fully AI chips and supercomputers in the US over the next four years.
Trump touted this as a show where his tariffs work, but experts pointed out that most companies are not in the position of Nvidia to make such a move.
In the wake of the administration’s fluctuating message on tariffs, chipmakers find themselves in a tight spot ahead of their major revenue reports.
“If you are a high flyer company like Nvidia or TSMC (Taiwanese semiconductor manufacturer) and are trying to report this week or the next week, we cannot provide guidance in the upcoming quarter.
If tariffs become effective on semiconductors, some proposed companies are in a better place than they were at least 10 years ago, since export restrictions and past tariffs forced them to rethink and adjust their supply chains from China.
“U.S. manufacturers have begun to move some of their production from China to Singapore, or to Taiwan or Japan, or other regions,” Morales said. “It was a little more certainty in ensuring supply to their key customers, even if they spent something on them.”
Still, other experts warned that the US is unlikely to have resources at home to meet chip production needs.
“there is no [a] “National supply available to compensate for gaps or shortages in these products, or shortages in domestic sources,” Murphy said.
Murphy added that even if companies could move manufacturing to the US or other countries with lower import taxes, uncertainty and economic impact could make U.S. chips exported internationally.
“The industry wants to have a robust and diverse supply chain. They want to be in the US that wants to be manufactured and hired in the US, but then customers who sell those new chips also need it,” he said. “They have to find foreign markets and foreign customers to sell those products.”
“The reality is that all of this uncertainty is that it makes customers think, “I really want the headache of dealing with a company that manufactures in the US,” he added.
