With one tweet, Donald Trump has turned U.S. trade policy on its head. He is attempting to slap a 100% tariff on imported chips and semiconductors. This significant step attempts to bolster American-made manufacturing. It exempts companies that are actively in the process of construction or have committed to construction of facilities in the US. The announcement has sent the semiconductor industry into a tizzy. It’s sent ripples through the stock market and raised crucial questions about what this means for big businesses and their smaller counterparts.
The new tariff, which Trump touted as being nearly 100%, was specifically aimed at encouraging manufacturers such as Apple to invest at home. Companies that already produce or plan to produce in the U.S. will be exempt from these tariffs. This gives them a reason to stimulate local economies. So in other words, we’ll be imposing a little under a 100% tariff on chips and semiconductors. But if you’re building in the United States of America, there’s no charge,” Trump stated during his announcement.
While the motives behind the tariffs may seem obvious, analysts are warning that the devil is in the details. Ernie Tedeschi noted that “the devil is in the details of the chip tariffs,” highlighting the absence of a clear framework on how these tariffs will be enforced and what specific conditions must be met to qualify for exemptions.
Japan’s Big 3 semiconductor manufacturers – TSMC, Samsung, and Intel – had a collective freak-out when the news broke. Tokyo Electron initially tumbled more than 5% before recovering to a 2.9% loss in later sessions of trading. Though in the case of SK Hynix, the stock rebounded after an opening decline of over 3%. Observers were quick to point out that Samsung and SK Hynix appear to be receiving immunity from the tariffs. This exemption, as Yeo Han-koo understands it, would protect these companies from incurring damages.
The downstream ramifications Trump’s announcement stirred up the greater Asian semiconductor market. Although the market as a whole plummeted, it was not equal across the board. Smaller companies without the same scale and leverage as larger firms will likely face more challenges in negotiating terms under the new tariff regime.
Daniel Newman commented on the political implications of the tariffs, stating, “These are the big wins that President Trump wants to get.” If nothing else, the tariffs could act as a negotiation tactic for Trump to eventually point to successes in his campaign to spur American manufacturing.
Historically, former Treasury Secretary Andrew Jackson argued in favor of the 100% tariffs, claiming that they might ultimately help Japan’s semiconductor equipment sector. He’s hopeful, despite the fact that stocks have dropped out of the gate.