Trump announces 100% tariff on computer chips. Here's what it could mean for your wallet.

USA Today

a day ago

President Donald Trump plans to launch a 100% tariff on non-U.S. computer chips. Details remain murky, but experts say the move could hurt consumers.
President Donald Trump plans to impose a 100% tariff on imported computer chips, a move experts warn could compel companies to pull back on production or hike prices.
Details remain murky, and the inflationary pressures likely won't be as dramatic as those from other tariffs. Still, a new tariff on chips could hit a wide range of products, from smartphones and laptops to cars and video game consoles.
"If you look at the industries that need chips, it's almost everything. You probably have at least 100 chips involved in the things you've done today," said Zac Rogers, an associate professor of operations and supply chain management at Colorado State University.
How will Trump's computer chip tariff work?
Trump unveiled the new tariff during an Aug. 6 Oval Office event, noting there would be an exception for companies that have committed to building chips within the U.S.
Additional details on the new tariff remain scarce. It's not yet clear when it will go into effect, for instance, or how it will impact products that contain chips, like laptops.
'There are a lot of caveats,' said Jason Miller, a professor of supply chain management at Michigan State University. 'Until we see the exact details of what harmonized system codes are covered, we can't fully understand the implications.'
The U.S. produces a fair amount of semiconductors already, exporting roughly $58 billion worth each year, according to Census Bureau data. But Miller noted that the U.S. is best at producing higher-end chips. Lower-end, more mundane chips tend to be imported from countries like Malaysia, he said, while 'super high-end' chips are imported from Taiwan.
In total, the country imports roughly $60 billion worth of semiconductors annually, according to the Census Bureau.
'The U.S. is not as cost-competitive at producing the lower-end, generic semiconductors,' like those found in household appliances like refrigerators, Miller said. 'It doesn't make sense for us to produce as many of those in the U.S. versus import them. Rather, let our resources specialize in where we have a competitive advantage, which is going to be higher-end products.'
Rogers said it makes sense for the U.S. to expand chip production, noting the country has made strides in recent years, especially under the CHIPS and Science Act signed by then-President Joe Biden in 2022. But he warned that growing chip manufacturing with fresh facilities and an improved talent pipeline will take time, and agreed that the U.S. is better off focusing on higher-end chip production.
'We're on the right track. The problem is, it's a really long track. ... We can't scale up fast enough to totally fulfill our own demand,' Rogers said. 'If we just slap all of these costs onto firms, it might actually slow down the progress that we're making.'
What does this mean for prices?
Experts who spoke to USA TODAY said more costly chip imports won't hit manufacturers as hard as other tariffs, such as the 50% tariff on steel and aluminum imports or 25% auto tariffs. Still, the new tariff could add pressure on companies that are already struggling to adjust to higher import costs.
'It's not deflationary, by any means,' Miller said. But 'quite frankly, it is truly impossible to say consumer inflationary impacts until details are spelled out.'
John Mitchell, president and CEO of the Global Electronics Association, a trade association for the global electronics industry, said he expects tariffs to drive up prices for goods like laptops, appliances, vehicles and medical devices.
"More than 60% of our member companies report that past tariffs have raised their costs and delayed production," he wrote in an emailed statement.
For certain products – including cars – chips make up a small portion of the total production costs. But Ivan Drury, director of insights at automotive research site Edmunds, described the tariff as 'yet another cut' to automakers, which also face a 25% auto tariff.
Automakers already say they are taking a hit from tariffs. General Motors in July said tariffs cost the company more than $1 billion in the second quarter, and Stellantis said it expects tariffs to cost it roughly $1.7 billion this year.
'It's a thousand cuts to die kind of thing,' Drury said of tariffs.
Drury added that automakers so far have avoided passing along tariff costs to their customers. He's not sure how long that will last.
So far, 'we're not seeing it reflected in the price," he said. But 'their shareholders aren't going to be happy with this forever.'
Used car owners could get hit especially hard by a computer chip tariff through higher repair costs, he said, as repair shops may be more likely to pass those higher costs directly to customers. More costly repairs could also impact insurance costs, since insurers would have to pay more to cover damaged vehicles.
It could be 'this snowball effect,' Drury said. 'It hasn't happened yet, but we know at some point something's going to break.'
Potential for shortages?
Another potential concern for consumers? Chip tariffs could make certain products more difficult to find.
The U.S. already saw this play out during the COVID-19-era semiconductor chip shortage, which impacted consumers' ability to buy new cars, laptops and video game consoles.
While a semiconductor tariff isn't expected to create widespread shortages to that degree, Rogers warned some companies may pull back on production if import costs go up. Already, automaker Stellantis has paused production at select plants to avoid paying tariffs, contributing to a 6% year-over-year decline in car shipments as of the second quarter.
'I think we can see shortages all over the place," Rogers said. 'It may not be as bad as 2021, because then, we couldn't get the chips. This, we'll just have to pay more for them. But if we pay more, we buy less.'