Latest news with #PetersonInstituteforInternationalEconomics
Time of India
3 days ago
- Business
- Time of India
Trump's planned 100% computer chip tariff sparks confusion among businesses and trading partners
By Matt O'Brien and Mae Anderson President Donald Trump's ambiguous plans for 100% tariffs on computer chips that aren't made in the U.S. are stoking confusion among businesses and trading partners - boosting stocks for leading semiconductor companies while leaving smaller producers scrambling to understand the implications. "We are still waiting for official guidance," said Limor Fried, founder and engineer at Adafruit Industries, a small electronics maker in New York. The chips that go into Adafruit's products come through U.S. sales and distribution companies as well as direct from companies in the Philippines and Taiwan. If those chips aren't exempt from tariffs, "it would increase the costs that go into our designs as the semiconductors are the most expensive component in our assemblies," Fried said. "For many of these tariffs, we often have to wait until we get a bill to know our exposure, and then we adjust our pricing to account for the increases." The U.S. imports a relatively small number of chips because most of the foreign-made chips in a device - from an iPhone to a car - were already assembled into a product, or part of a product, before it landed in the country. "The real question everybody in the industry is asking is whether there will be a component tariff, where the chips in a device would require some sort of separate tariff calculation," said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. Trump said Wednesday that companies that "made a commitment to build" in the U.S. would be spared the import tax, even if they are not yet producing those chips in American factories. "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 . "But if you're building in the United States of America, there's no charge." Wall Street investors interpreted that as good news not just for U.S. companies like Intel and Nvidia, but also for the biggest Asian chipmakers like Samsung and Taiwan Semiconductor Manufacturing Company that have been working to build U.S. factories. But it left greater uncertainty for smaller chipmakers in Europe and Asia that have little exposure to the artificial intelligence boom but still make semiconductors inserted into essential products like cars or washing machines. German chipmaker Infineon Technologies, which supplies chips to the auto industry, said in an emailed statement Thursday that it "can't speculate about potential semiconductor tariffs " and Trump's announcement, "as no official documents have been published at this point." These producers "probably aren't large enough to get on the mfor an exemption and quite probably wouldn't have the kind of excess capital and margins to be able to add investment at a large scale into the United States," Chorzempa said. It's also not clear how the chip-specific tariffs would apply to trading partners that already made broader deals with Trump - such as agreements with the European Union, Japan and South Korea that tax most goods at 15%. A trade group, the Semiconductor Industry Association, said Thursday it was "eager to learn more" about the planned chip tariffs, "including the scope and structure of exemptions." The announcement came more than three months after Trump temporarily exempted most electronics from his administration's most onerous tariffs. During the COVID-19 pandemic, a shortage of computer chips increased the price of autos and contributed to higher inflation. Chorzempa said chip tariffs could again raise prices by hundreds of dollars per vehicle if the semiconductors inside a car are not exempt. "There's a chip that allows you to open and close the window," Chorzempa said. "There's a chip that is running the entertainment system. There is a chip that's kind of running all the electronics. There are chips, especially in EVs, that are doing power management, all that kind of stuff." Much of the investment into building U.S. chip factories began with the bipartisan CHIPS and Science Act that President Joe Biden signed into law in 2022, providing more than $50 billion to support new computer chip plants, fund research and train workers for the industry. Trump has vocally opposed those financial incentives and taken a different approach, 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 electronics. Trump's announcement could be a signal for other chipmakers to imitate the investments that companies like South Korea's Samsung are making, said Long Le, a business professor at Santa Clara University. But with China's SMIC and Huawei unlikely to be exempted, it could also give the Trump administration "more leverage at the trading table" ahead of an upcoming deal with China, he said.
Kyodo News
3 days ago
- Business
- Kyodo News
Trump's planned 100% computer chip tariff sparks confusion
President Donald Trump's ambiguous plans for 100% tariffs on computer chips that aren't made in the U.S. are stoking confusion among businesses and trading partners — boosting stocks for leading semiconductor companies while leaving smaller producers scrambling to understand the implications. 'We are still waiting for official guidance," said Limor Fried, founder and engineer at Adafruit Industries, a small electronics maker in New York. The chips that go into Adafruit's products come through U.S. sales and distribution companies as well as direct from companies in the Philippines and Taiwan. If those chips aren't exempt from tariffs, 'it would increase the costs that go into our designs as the semiconductors are the most expensive component in our assemblies,' Fried said. "For many of these tariffs, we often have to wait until we get a bill to know our exposure, and then we adjust our pricing to account for the increases.' The U.S. imports a relatively small number of chips because most of the foreign-made chips in a device — from an iPhone to a car — were already assembled into a product, or part of a product, before it landed in the country. "The real question everybody in the industry is asking is whether there will be a component tariff, where the chips in a device would require some sort of separate tariff calculation,' said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. Trump said Wednesday that companies that "made a commitment to build" in the U.S. would be spared the import tax, even if they are not yet producing those chips in American factories. '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. 'But if you're building in the United States of America, there's no charge.' Wall Street investors interpreted that as good news not just for U.S. companies like Intel and Nvidia, but also for the biggest Asian chipmakers like Samsung and Taiwan Semiconductor Manufacturing Company that have been working to build U.S. factories. But it left greater uncertainty for smaller chipmakers in Europe and Asia that have little exposure to the artificial intelligence boom but still make semiconductors inserted into essential products like cars or washing machines. German chipmaker Infineon Technologies, which supplies chips to the auto industry, said in an emailed statement Thursday that it 'can't speculate about potential semiconductor tariffs' and Trump's announcement, 'as no official documents have been published at this point.' These producers "probably aren't large enough to get on the map for an exemption and quite probably wouldn't have the kind of excess capital and margins to be able to add investment at a large scale into the United States,' Chorzempa said. It's also not clear how the chip-specific tariffs would apply to trading partners that already made broader deals with Trump — such as agreements with the European Union, Japan and South Korea that tax most goods at 15%. A trade group, the Semiconductor Industry Association, said Thursday it was 'eager to learn more' about the planned chip tariffs, 'including the scope and structure of exemptions.' The announcement came more than three months after Trump temporarily exempted most electronics from his administration's most onerous tariffs. During the COVID-19 pandemic, a shortage of computer chips increased the price of autos and contributed to higher inflation. Chorzempa said chip tariffs could again raise prices by hundreds of dollars per vehicle if the semiconductors inside a car are not exempt. 'There's a chip that allows you to open and close the window," Chorzempa said. "There's a chip that is running the entertainment system. There is a chip that's kind of running all the electronics. There are chips, especially in EVs, that are doing power management, all that kind of stuff.' Much of the investment into building U.S. chip factories began with the bipartisan CHIPS and Science Act that President Joe Biden signed into law in 2022, providing more than $50 billion to support new computer chip plants, fund research and train workers for the industry. Trump has vocally opposed those financial incentives and taken a different approach, 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 electronics. Trump's announcement could be a signal for other chipmakers to imitate the investments that companies like South Korea's Samsung are making, said Long Le, a business professor at Santa Clara University. But with China's SMIC and Huawei unlikely to be exempted, it could also give the Trump administration "more leverage at the trading table" ahead of an upcoming deal with China, he said.
Business Times
3 days ago
- Business
- Business Times
Trump trade mayhem will steepen yield curve and weaken the US dollar
ON AUG 1, US President Donald Trump finalised reciprocal tariffs announced in April, bringing a measure of relief to Asian economies that secured rates at or below 20 per cent. However, uncertainty over these deals, coupled with a potential slowdown in the global and US economies in the second half of the year, explains why the US yield curve may steepen further and in turn drive the greenback lower. The larger damage to the US dollar, however, will be seen in the long run as tariffs force countries to diversify their trade away from the US to other economies. This will reduce the use of, and reliance on, the US dollar in global trade, which will erode its value. Much uncertainty over what comes next for global trade Notably, the world's most significant trade deal is yet to be agreed. After the third round of trade talks between US and China, both parties were said to have agreed on a further extension of the trade truce. US-China trade talks are complicated by many sensitive issues ranging from artificial intelligence (AI) and semiconductor technology access for China, to the export of rare earth and critical minerals to the US. The negotiations will have important implications to China's economic health and the outlook for the rest of Asia. For now, if tariffs imposed on China by the first Trump administration and the Biden administration are included, the Peterson Institute for International Economics has calculated that the average US tariffs on Chinese imports stand at 54.9 per cent, while the average China tariffs on US imports are at 32.6 per cent. Numbers in such a high range cannot be good for economic growth. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Meanwhile, trade deals with other key economies like India, Canada and Brazil have stalled, due to non-trade related foreign policy and geopolitical issues. For the deals that have been inked, many come with additional investment commitments to the US – US$350 billion from South Korea, US$550 billion from Japan and US$600 billion from the European Union, for instance. In each case, the news has been met with disapproval and scepticism domestically. How will these investments be funded and implemented? Countries may need to find workarounds or reductions in these commitments, throwing their trade deals into jeopardy. There are also many questions as to how the tariffs on specific classes of goods will be implemented and stacked on. These include the Section 232 sectoral tariffs on industries including cars, semiconductors and pharmaceuticals, and the 'transhipment tariffs' for goods considered to have been transhipped to avoid duties. Increasing worries of a global economic slowdown in H2 Adding to this web of tariff-related uncertainties, the health of the US and global economy has reached a critical juncture. Interestingly, the global economy, including both US and Asian economies, did remarkably well for H1. Due to the surge in exports, Singapore surprised the market with a strong above-trend 4.2 per cent gross domestic product growth for H1. Taiwan's second-quarter GDP jumped by almost 8 per cent as well. As a result of China's economic resilience, the International Monetary Fund (IMF) upgraded its 2025 GDP forecast for emerging market and developing economies to 4.1 per cent from 3.7 per cent previously. However, GDP numbers are backward-looking, and various authorities have warned that 'payback' time comes next for the global economy as higher tariff rates hit. In particular, the rush to front-load exports is likely over. Against expectations of a further recovery towards 50, China's latest official manufacturing purchasing managers' index disappointed with a pullback to 49.3 in July, suggesting that the manufacturing slowdown may have already begun. The US economy also registered a stronger-than-expected 3 per cent year-on-year growth for Q2, but an intense debate is brewing on whether the negative impact of rising trade tariffs on the US economy will now be more keenly felt in H2. US Federal Reserve chair Jerome Powell has said that US importers have so far been able to absorb most of the tariffs. But this is increasingly difficult with the higher tariffs from Aug 1 – leading to higher consumer prices, reduced demand and a drag on the economy. Fed cuts and de-dollarisation to drive greenback down We believe the Fed will resume its rate cuts at September's Federal Open Market Committee meeting, after July's disappointingly weak non-farm payrolls report. Effectively, the average job gain over the past three months has now been revised to just 35,000 – dropping to almost 'stall speed' and signalling weakness in the labour market. While Fed rate cuts will drive down short-term interest rates, longer-term rates like US Treasury yields will stay sticky due to concerns over the unsustainable US debt load. As a result, the US yield curve will likely steepen further, which will add pressure to the dollar. Beyond these pressures, longer-term structural trends will weigh on the US dollar. Many economies are realising that higher trade tariffs from the US are here to stay. To mitigate the risks, they will now need to restructure their supply chains and exports by diversifying trade to other economies, and by intensifying intra-regional trade with their immediate neighbours. This may well accelerate de-dollarisation and reduce the parking of trade proceeds in US Treasuries, both of which are clearly negative for the dollar over the long run. Some Asian currencies have been advancing against the US dollar in recent months. For instance, the Singapore dollar has strengthened to just under 1.3 to the US dollar. It will likely stay in this range for now – the Monetary Authority of Singapore is likely to delay further easing of monetary policy until this October or even January next year, when there is clear evidence that the pre-tariff export front-loading rush is over. The US dollar index, which measures the value of the US dollar against a basket of key global currencies, has now dropped below 100. We expect it to fall towards 97 by the end of the year, and towards 95 by the middle of next year. Due to strong safe-haven demand, we stay long-term positive on gold, which is expected to rise further to US$3,700 per ounce by mid-2026. Trump will be long remembered for his promise to Make America Great Again – however, it is unlikely that he will be making the American dollar great again any time soon. The writer is head of markets strategy at UOB
Chicago Tribune
3 days ago
- Business
- Chicago Tribune
President Donald Trump's planned 100% computer chip tariff sparks confusion among businesses and trading partners
President Donald Trump's plans for 100% tariffs on computer chips that aren't made in the U.S. are stoking confusion among businesses and trading partners — boosting stocks for leading semiconductor companies while leaving smaller producers scrambling to understand the implications. 'We are still waiting for official guidance,' said Limor Fried, founder and engineer at Adafruit Industries, a small electronics maker in New York. Wall Street drifts as stock markets worldwide take Trump's new tariffs in strideThe chips that go into Adafruit's products come through U.S. sales and distribution companies as well as direct from companies in the Philippines and Taiwan. If those chips aren't exempt, 'it would increase the costs that go into our designs as the semiconductors are the most expensive component in our assemblies,' Fried said. 'For many of these tariffs, we often have to wait until we get a bill to know our exposure, and then we adjust our pricing to account for the increases.' The U.S. imports a relatively small number of chips because most of the foreign-made chips in a device — from an iPhone to a car — were already assembled into a product, or part of a product, before it landed in the country. 'The real question everybody in the industry is asking is whether there will be a component tariff, where the chips in a device would require some sort of separate tariff calculation,' said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. Trump said Wednesday that companies that 'made a commitment to build' in the U.S. would be spared the import tax, even if they are not yet producing those chips in American factories. '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. 'But if you're building in the United States of America, there's no charge.' Wall Street investors interpreted that as good news not just for U.S. companies like Intel and Nvidia, but also for the biggest Asian chipmakers like Samsung and Taiwan Semiconductor Manufacturing Company that have been working to build U.S. factories. But it left greater uncertainty for smaller chipmakers in Europe and Asia that have little exposure to the artificial intelligence boom but still make semiconductors inserted into essential products like cars or washing machines. These producers 'probably aren't large enough to get on the map for an exemption and quite probably wouldn't have the kind of excess capital and margins to be able to add investment at a large scale into the United States,' Chorzempa said. It's also not clear how the chip-specific tariffs would apply to trading partners that already made broader deals with Trump — such as agreements with the European Union, Japan and South Korea that tax most goods at 15%. The announcement came more than three months after Trump temporarily exempted most electronics from his administration's most onerous tariffs. During the COVID-19 pandemic, a shortage of computer chips increased the price of autos and contributed to higher inflation. Chorzempa said chip tariffs could again raise prices by hundreds of dollars per vehicle if the semiconductors inside a car are not exempt. 'There's a chip that allows you to open and close the window,' Chorzempa said. 'There's a chip that is running the entertainment system. There is a chip that's kind of running all the electronics. There are chips, especially in EVs, that are doing power management, all that kind of stuff.' Much of the investment into building U.S. chip factories began with the bipartisan CHIPS and Science Act that President Joe Biden signed into law in 2022, providing more than $50 billion to support new computer chip plants, fund research and train workers for the industry. Trump has vocally opposed those financial incentives and taken a different approach, 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 electronics.
San Francisco Chronicle
3 days ago
- Business
- San Francisco Chronicle
Trump's planned 100% computer chip tariff sparks confusion among businesses and trading partners
President Donald Trump's plans for 100% tariffs on computer chips that aren't made in the U.S. are stoking confusion among businesses and trading partners — boosting stocks for leading semiconductor companies while leaving smaller producers scrambling to understand the implications. 'We are still waiting for official guidance," said Limor Fried, founder and engineer at Adafruit Industries, a small electronics maker in New York. The chips that go into Adafruit's products come through U.S. sales and distribution companies as well as direct from companies in the Philippines and Taiwan. If those chips aren't exempt, 'it would increase the costs that go into our designs as the semiconductors are the most expensive component in our assemblies,' Fried said. "For many of these tariffs, we often have to wait until we get a bill to know our exposure, and then we adjust our pricing to account for the increases.' The U.S. imports a relatively small number of chips because most of the foreign-made chips in a device — from an iPhone to a car — were already assembled into a product, or part of a product, before it landed in the country. "The real question everybody in the industry is asking is whether there will be a component tariff, where the chips in a device would require some sort of separate tariff calculation,' said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. Trump said Wednesday that companies that "made a commitment to build" in the U.S. would be spared the import tax, even if they are not yet producing those chips in American factories. '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. 'But if you're building in the United States of America, there's no charge.' Wall Street investors interpreted that as good news not just for U.S. companies like Intel and Nvidia, but also for the biggest Asian chipmakers like Samsung and Taiwan Semiconductor Manufacturing Company that have been working to build U.S. factories. But it left greater uncertainty for smaller chipmakers in Europe and Asia that have little exposure to the artificial intelligence boom but still make semiconductors inserted into essential products like cars or washing machines. These producers "probably aren't large enough to get on the map for an exemption and quite probably wouldn't have the kind of excess capital and margins to be able to add investment at a large scale into the United States,' Chorzempa said. It's also not clear how the chip-specific tariffs would apply to trading partners that already made broader deals with Trump — such as agreements with the European Union, Japan and South Korea that tax most goods at 15%. The announcement came more than three months after Trump temporarily exempted most electronics from his administration's most onerous tariffs. During the COVID-19 pandemic, a shortage of computer chips increased the price of autos and contributed to higher inflation. Chorzempa said chip tariffs could again raise prices by hundreds of dollars per vehicle if the semiconductors inside a car are not exempt. 'There's a chip that allows you to open and close the window," Chorzempa said. "There's a chip that is running the entertainment system. There is a chip that's kind of running all the electronics. There are chips, especially in EVs, that are doing power management, all that kind of stuff.' Much of the investment into building U.S. chip factories began with the bipartisan CHIPS and Science Act that President Joe Biden signed into law in 2022, providing more than $50 billion to support new computer chip plants, fund research and train workers for the industry. Trump has vocally opposed those financial incentives and taken a different approach, 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 electronics.
