What You Need to Know About the Chip Tariff
- Farah Ansari
- Feb 2
- 2 min read
Updated: Feb 6
On January 27th, Trump proposed a 100% tariff on foreign-made chips and semiconductors, in efforts to bring production back to the U.S.
The Facts
U.S. Semiconductor Market: The U.S. leads half of the global semiconductor market, with sales reaching $264 billion in 2023.
Global Production: While the U.S. dominates sales, TSMC (Taiwan Semiconductor Manufacturing Company) produces about 60% of the world’s semiconductors and 90% of the most advanced chips.
U.S. Dependency: North America relies heavily on TSMC, with 65% of TSMC's revenue coming from U.S. markets, supporting industries like smartphones, AI, data centers, gaming, and automotive.
Despite leading in sales, the U.S. share of global semiconductor production has decreased from 70% in 1990 to just 10-12% by 2022. In response, Biden introduced the CHIPS and Science Act in 2022, allocating $53 billion to incentivize domestic chip manufacturing and R&D.
The Tariff
Trump’s plan for a 100% tariff on foreign semiconductors could have consequential impacts such as:
Higher Costs for U.S. Consumers and Manufacturers: Chips from TSMC (used by companies like AMD, Apple, and Nvidia) would become more expensive, raising prices for consumer electronics and tech industries.
Supply Chain Disruptions: U.S. manufacturers depend on TSMC for critical components. Heavy tariffs could cause delays or shortages, especially for chips used in AI, 5G, and autonomous vehicles, triggering a chain reaction across the industry.
Slower Domestic Production Growth: Building semiconductor factories in the U.S. takes years and significant investment, so the U.S. will remain dependent on foreign chips in the short term.
Global Tariff War: If companies move production out of the U.S. to avoid tariffs, it could spark a global tariff war, raising costs, hurting U.S. tech firms, and damaging relations with Taiwan.
Weakened U.S. Tech Competitiveness: Higher chip prices and disrupted supply chains could make U.S. companies less competitive globally. The increased costs might slow innovation or push operations abroad, and could deter investments in U.S.-based R&D.
While the goal of the tariff is to bring chip manufacturing back to the U.S., the immediate consequences could lead to higher costs, supply chain chaos, slower domestic production, and increased trade tensions—ultimately weakening U.S. tech competitiveness.
As of now, the tariff has not yet been imposed.
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