The semiconductor industry, a crucial backbone of modern technology, is currently under intense scrutiny as former President Donald Trump plans to impose 100% tariffs on foreign-made semiconductor imports. This step, which he first unveiled in his second state of the state address, is intended to promote greater manufacturing within the state. The world is increasingly growing more reliant on thin slices of silicon known as wafers. That’s why the stakes in this sector have never been higher.
Semiconductors function as electronic switches. Operating in the binary language of 0s and 1s, this digital code acts as the bedrock of our computing industry. They are important for everything—from consumer electronics to next generation computing architectures. Taiwan’s TSMC, established in 1987, was the world’s first semiconductor foundry. It has since positioned itself as a leader in the industry. In fact, TSMC supplied semiconductors for many of the most talked about tech companies these days—companies like Nvidia, Apple, and Microsoft.
In recent months, the U.S. government has woken up to the strategic importance of semiconductor manufacturing. Specifically, it solidified $6.6 billion in awards to TSMC for its new factory in Arizona. A large investment like this is a powerful indicator of one important trend. In response, the U.S. has passed historic amounts of funding in recent years for bolstering domestic technology manufacturing capacity. More companies are beginning to take their cue from TSMC. As a crucial part of this industrial policy, they are setting up manufacturing hubs across the United States.
No one would argue that the role Taiwan plays in the global semiconductor supply chain is anything but critical. Countries like the UK, US, and the entire Europe as well as production powerhouse China heavily rely on Taiwanese production to meet their semiconductor needs. Sure, TSMC is the enormous market leader, but it has faced incredible turmoil. Some production delays have become unavoidable as when they’re caused by a lack of skilled workers.
Most recently, in early August, Trump doubled down on his promise to impose tariffs on foreign semiconductors. In doing so, he’s signaled that he will not allow the U.S. to be “held hostage” by countries such as China. He walks the line, perhaps intentionally, between standing strong on protecting American technology. This brazen posture propels a bigger play. It features mutual tariffs that force companies to produce goods here in the states.
Foreign semiconductor manufacturers would not be impacted equally by Trump’s proposed tariffs. Just last week, South Korean officials announced that South Korean companies, including Samsung and SK Hynix, would be spared the full brunt of the 100% tariffs. This relief becomes possible due to their deep investments in new chip fabrication plants on U.S. soil. This exemption serves as an important reminder of the intricacies of international trade relations and the role that foreign direct investment plays in supporting domestic manufacturing.
As this story continues to unfold, stakeholders across the semiconductor ecosystem are keeping a watchful eye. The tariffs that are being proposed would have a devastating effect on foreign manufacturers. They would damage US companies that rely on imported semiconductors. The prospect of rising production costs should be of concern for consumers and manufacturers.
The semiconductor industry is ever-changing. This evolution is part of a much larger story—one about the changing nature of global technology competition, national security, and economic statecraft. We’ve seen in the current administration an attempt to remake trade policy around an explicit goal of bolstering American manufacturing. The semiconductor industry is another big example, powering both economic growth and accelerating geopolitical competition.