Trump announces new tariff that could have devastating impact on tech industry

Daily Mail​

3 days ago

President Donald Trump has said that he will impose a 100% tariff on computer chips, raising the prospect of higher prices for electronics, cars, household appliances and other essential products dependent on the processors powering the digital age.
'We'll be putting a tariff of approximately 100% on chips and semiconductors,' Trump said in the Oval Office while meeting with Apple CEO Tim Cook on Wednesday.
'But if you're building in the United States of America, there's no charge.'
The announcement came more than three months after Trump temporarily exempted most electronics from his administration's most onerous tariffs.
The Republican president said companies that make computer chips in the US would be spared the import tax.
During the Covid-19 pandemic, a shortage of computer chips increased the price of cars and contributed to higher inflation.
Investors seemed to interpret the potential tariff exemptions as a positive for Apple and other major tech companies that have been making huge financial commitments to manufacture more chips and other components in the US.
Big Tech already has made collective commitments to invest about $1.5 trillion in the US since Trump moved back into the White House in January.
That figure includes a $600 billion promise from Apple after the iPhone maker boosted its commitment by tacking another $100 billion on to a previous commitment made in February.
Now the question is whether the deal brokered between Cook and Trump will be enough to insulate the millions of iPhones made in China and India from the tariffs that the administration has already imposed and reduce the pressure on the company to raise prices on the new models expected to be unveiled next month.
Wall Street certainly seems to think so. Apple's stock price gained 5% in Wednesday regular trading sessions before rising another 3% in extended trading after Trump announced some tech companies won't be hit with the latest tariffs while Cook stood alongside him.
The shares of AI chipmaker Nvidia, which also has recently made big commitments to the US, rose slightly in extended trading to add to the $1 trillion gain in market value the Silicon Valley company has made since the start of Trump's second term.
The stock price of computer chip pioneer Intel, which has fallen on hard times, also climbed in extended trading.
The chip industry's main trade group, the Semiconductor Industry Association, has so far declined to comment on Trump's latest tariffs.
Demand for computer chips has been climbing worldwide, with sales increasing 19.6% in the year-ended in June, according to the World Semiconductor Trade Statistics organization.
It is not clear how many chips, or from which country, would be impacted by the new levy.
Taiwanese chip contract manufacturer TSMC - which makes chips for most U.S. companies - has factories in the country, so its big customers such as Nvidia are not likely to face increased tariff costs.
The AI chip giant has itself said it plans to invest hundreds of billions of dollars in US-made chips and electronics over the next four years.
'Large, cash-rich companies that can afford to build in America will be the ones to benefit the most. It´s survival of the biggest,' said Brian Jacobsen, chief economist at investment advisory firm Annex Wealth Management.
Trump's tariff threats mark a significant break from existing plans to revive computer chip production in the US that were drawn up during the Biden administration.
Since taking over from Biden, Trump has been deploying tariffs to incentivize more domestic production.
Essentially, the president is betting that the threat of dramatically higher chip costs would force most companies to open factories domestically, despite the risk that tariffs could squeeze corporate profits and push up prices for mobile phones, TVs and refrigerators.
By contrast, the bipartisan CHIPS and Science Act that Biden signed into law in 2022 provided more than $50 billion to support new computer chip plants, fund research and train workers for the industry.
The mix of funding support, tax credits and other financial incentives were meant to draw in private investment, a strategy that Trump has vocally opposed.
The Commerce Department under Biden last year convinced all five leading-edge semiconductor firms to locate chip factories in the US as part of the program.
The department said the US last year produced about 12% of semiconductor chips globally, down from 40% in 1990.
Any chip tariffs would likely target China, with whom Washington is still negotiating a trade deal.
'There's so much serious investment in the United States in chip production that much of the sector will be exempt,' said Martin Chorzempa, senior fellow at the Peterson Institute for International Economics.
Since chips made in China won't be exempt, chips made by SMIC or Huawei would not be either, Chorzempa said, noting that chips from these companies entering the US market were mostly incorporated into devices assembled in China.
'If these tariffs were applied without a component tariff, it might not make much difference,' he said.
Chipmaking nations South Korea and Japan, as well as the European Union, have reached trade deals with the U.S., potentially giving them an advantage.
The EU said it agreed to a single 15% tariff rate for the vast majority of EU exports, including cars, chips and pharmaceuticals.
South Korea and Japan said separately that U.S. agreed not to give them worse tariff rates than other countries on chips, suggesting a 15% levy as well.