Chip production in the U.S. President Trump threatens tariffs of up to 100% on semiconductors

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The U.S. may soon impose customs duties of up to 100% on computer chips, semiconductors, and pharmaceuticals. President Donald Trump announced this at the House GOP Issues Conference, a closed meeting of House Republicans.

Will the USA soon be facing up to 100% tariffs on certain goods not produced in the United States? Last Tuesday, the Republicans in the US Congress held a closed meeting at the Trump National Doral Miami Resort in Florida to set the political course for the current legislative period of the second Trump administration. US President Donald Trump took the opportunity to once again sharply attack the handling of the chip subsidy program US CHIPs and Science Act under his predecessor Joe Biden and to propagate his own ideas on how the domestic semiconductor industry—and other weakening industries—could be boosted.

In his speech to Republican members of parliament, Donald Trump described the implementation of the semiconductor subsidy program CHIPS and Science Act—which, however, was initiated and developed in its current form by the first Trump administration—as "ridiculous". Instead of wasting taxpayers' money on companies, other incentives should be created to encourage companies to produce their goods in the USA again.

Tariffs instead of tax money to create "incentives" for production in the USA

Trump's proposal: Instead of handing out money to companies, tariffs of 25, 50 or even 100 % should be imposed on the import of goods, which should encourage companies to build plants in the USA again and produce locally. "In particular, we will be imposing tariffs on the foreign production of computer chips, semiconductors and pharmaceuticals in the near future in order to bring the production of these important goods back to the United States of America," said the US President in his speech to the assembled MPs.

In his speech, Trump pointed out that the chip manufacturing industry had migrated from the USA to Taiwan. "And we want them to come back, and we don't want to give them billions of dollars, like this ridiculous program that Biden has to give billions of dollars to everybody. They already have billions of dollars. They have nothing but money, Joe. They didn't need money." Trump was alluding in particular to the global market leader in semiconductor production, the Taiwanese foundry TSMC. The manufacturing specialist had received a total of USD 11.6 billion through the US CHIPs and Science Act grant program—USD 6.6 billion in direct grants and a further USD 5 billion in tax breaks and loans. Trump failed to mention that the money was used for the location of the 5-nanometer fab in Arizona, in the expansion of which TSMC claims to have invested USD 65 billion of its own funds.

Instead of offering money as an incentive, however, Trump is threatening with a rhetorical cudgel that has proven itself in his speeches: customs duties. "They needed an incentive and the incentive will be—they won't want to pay 25, 50 or even 100 percent taxes," Trump said in his speech. "They're going to build their factory with their own money. We don't have to give them money. They're going to come because it's good for them to come here." He added that foreign companies receiving incentives in the form of subsidies under the CHIPS Act could use the money freed up to build factories in other countries.

In addition to the aforementioned semiconductor and medical products, Trump could also imagine other economic sectors in which tariffs of this magnitude should be applied. In particular, he mentioned steel production and the manufacture of washing machines and tumble dryers.

Customs duties a contrary course to global recommendations

President Trump's tariff plans stand in stark contrast to the recommendations made by business associations worldwide to promote the chip industry—and to the new funding plans that were only recently passed. Just last Monday, January 27, 2025, the House of Representatives introduced the STAR Act (Semiconductor Technology Advancement and Research), a successor to the CHIPs Act. As part of this act, the term of the Advanced Manufacturing Investment Credit (AMIC) - the aforementioned 25% tax credit for chip production—and the eligibility of the credit for investments in semiconductor design, the research-intensive mapping of a chip's complicated circuits and functions, were officially extended.

The US government is thus continuing to swing back and forth massively in its course with regard to economic stimulus. The Republican Speaker of the House of Representatives, Mike Johnson, initially announced in November 2024 that he would consider repealing the CHIPS Act. Following protests from business associations, he did an about-turn and said that the CHIPS Act was not on the agenda for repeal. This led to the announcement of the STARS Act—now President Trump is effectively advocating the opposite of what the current stimulus plan envisions.

"The CHIPS Act investment tax credit has been extremely successful in strengthening the U.S. semiconductor ecosystem by spurring significant private investment and helping to put the U.S. on track to more than triple domestic chip manufacturing capacity by 2032," the Semiconductor Industry Association (SIA) wrote in a press release. "By extending the life of the credit, the STAR Act would build on this momentum by encouraging the continued growth of chip manufacturing in the United States. By expanding the scope of the credit to include chip design, the STAR Act would ensure that the U.S. secures the economic, national security, and first-mover advantages of global leadership in semiconductor technology." The Semiconductor Association has not yet commented on the recent speech by the US President. However, it can be assumed that the association will not accept the withdrawal of the recently promised benefits.

In a policy briefing for the new administration, the SIA stated that the bipartisan CHIPS Act introduced in 2020 has reversed the decline in chip production in the US. This had fallen from 37 percent of global production in 1990 to 10 percent in 2022. The CHIPS Act has stimulated research and development and triggered the construction of domestic wafer fabs, according to the SIA. "Based on our current trajectory, the U.S. is expected to triple its chipmaking capacity by 2032, with a growth rate that leads the world and increases America's share of global capacity for the first time in four decades," said John Neuffer, president of the SIA, in his opening remarks.

The Consumer Technology Association (CTA) is also against tariffs. Its website, which advocates for trade, states: "Global supply chains are complicated and often take decades to develop. Tariffs disrupt supply chains and impose unnecessary costs on American businesses and innovation. Unfair trade practices should be addressed through the World Trade Organization and with our global allies. Opening global markets, not closing them, promotes economic competitiveness." The CTA calls for avoiding government intervention that forces the localization of production, data and services.

In fact, it is more than questionable whether a new construction of complete chip production facilities or pharmaceutical laboratories on US territory could even be implemented within the four years of Trump's second term—and whether manufacturers that already operate global production facilities would want to build new facilities on US soil at all. Even if local production in the US were to be exhausted, this would inevitably lead to surplus and underutilization in other locations. It is doubtful whether this would be economically viable for companies—despite the threat of punitive tariffs. (sg)