First New Exceptions, Then New Special Tariffs U.S. Wavers on Electronics Tariffs Yet Again

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There was a brief sigh of relief in the global electronics market on Friday: the U.S. Department of Commerce announced that smartphones and manufacturing equipment, among other products, would be exempt from the newly imposed reciprocal tariffs. But by Sunday, President Trump delivered another blow—he plans to announce a special tariff on semiconductor imports later this week.

The US government still seems internally uncertain about its exact stance on the tariffs highly favored by President Donald Trump, especially concerning electronic products. Last Friday, April 11, 2025, it briefly appeared as though the global semiconductor market could breathe a sigh of relief: The US Customs and Border Protection Agency (CBP) announced in an update regarding the exemptions from the reciprocal tariffs that 20 additional product categories listed in the Harmonized Tariff Schedule (HTS) would be exempt from the new tariff regulations. Previously, this had only applied to individual semiconductor components like transistors or diodes, but the new exemptions looked much more promising: Now, product categories such as memory, smartphones, laptops, servers, or semiconductor manufacturing machinery would no longer be subject to the new import duties. These exemptions would explicitly apply retroactively to April 5.

In addition, the globally applicable reciprocal tariffs have been suspended for 90 days, ostensibly to negotiate new terms with affected regions. Only China remains fully subject to the tariffs. In fact, total duties on imports from China now amount to 125%—excluding items listed on the exemption list.

The bizarre aspect: The vast majority of products that the USA imports from China are electronic products! According to a survey by the Observatory of Economic Complexity (OEC) from 2023, the USA imported electronics and electrical machinery worth 119.1 billion USD from China in 2023—predominantly products from those categories that should now be exempt from the tariffs. Following in second and third place in terms of goods categories are "Machinery, mechanical appliances & parts" (89 billion USD), some of which are also included in the new exemption regulations, and "Toys, games & sports equipment" (33.1 billion USD). With all the tariffs and exemptions, the reaction of the US Customs and Border Protection Agency (CBP) only underscores how dependent the United States already is on China.

Relief is Short-Lived

The update was a direct response to the chaos caused by the announcement of reciprocal tariffs in the electronics market. Although the US Department of Commerce had assured from the beginning that there would be exemptions for certain semiconductor products, these primarily referred to individual digital components like transistors, diodes, or simple microcontrollers. However, for more complex components such as SoCs, high-end GPUs, or microcontrollers with integrated peripherals, as well as machinery for semiconductor manufacturing or complete systems like smartphones, laptops, and servers, the import tariffs were expected to apply in full. Especially US tech firms, foremost among them the top-listed US tech companies like Apple, Nvidia, Microsoft, Meta, or Alphabet, consequently suffered market losses. In the case of Nvidia, only about 20% of the entire product portfolio would not have been affected by the tariffs. Analysts had calculated that an Apple iPhone Pro, which currently costs 1,600 USD in the US, could become up to 700 dollars more expensive if the tariffs were implemented as announced. Apple responded immediately and chartered several planes to reportedly quickly fly up to 600 tons of smartphones manufactured in India into the US.

However, the relief from Friday did not last long. Just two days later, on Sunday, April 13, US President Donald Trump announced before assembled reporters that these exemptions should only be "short-term." Furthermore, he promised that he would announce the special tariffs on semiconductors he had already promised in January later this week. Only to then immediately cryptically relativize that there must be exemptions for some companies. He did not elaborate on exactly what he meant by that.

Trump's Commerce Secretary Howard Lutnick also announced on Sunday in an interview with the US television network ABC that the President "in a month or two [...] would impose some sort of focus tariff" on smartphones, computers, and other electronic products as well as sectoral tariffs on semiconductors and pharmaceuticals. The new tariffs would then not fall under Trump's so-called reciprocal tariffs. "He says they are exempt from the reciprocal tariffs, but they are included in the semiconductor tariffs that will likely come in a month or two," Lutnick said in the interview on ABC's "This Week." Lutnick again emphasized that these measures were intended to bring the production of these products to the United States.

Make it Anywhere—But Not in the U.S.

Lutnick's promise is highly questionable. Not only because it would be difficult to impossible for US chip manufacturers to relocate their chip development and production to the US within a short period—let alone within three months—due to the lack of suitable manufacturing facilities. Even if it were possible to swiftly relocate the production of memory, processors, or SoCs, or even the entire production of smartphones and laptops, back to the US, it would still be drastically more expensive due to the tariffs. This is because basic materials and raw materials, especially rare earths or metals, would still need to be sourced internationally. However, these are not currently considered on the extended exemption list.

One of the main sources for these materials is ironically China: With a share of almost 70% (270,000 metric tons) of the world's rare earth production, the People's Republic remains the world's dominant producer. The production focuses on light rare earths such as neodymium and praseodymium, which are needed for high-strength magnets in electric vehicles and wind turbines. The USA is in second place but can only meet a fraction of the demand with an extraction of about 45,000 metric tons annually.

China has already responded with drastic countermeasures. According to Reuters, citing Chinese sources, Beijing has halted exports of rare earths and magnets to the United States with immediate effect. The message is clear: if the U.S. continues down this aggressive path, China will cut off vital resources at the source.

The fact that the reciprocal tariffs apparently focused exclusively on products makes another ironic weakness in the tariff collections apparent: those who need raw materials for their manufacturing that cannot be sourced in the USA are rather encouraged not to manufacture in the USA at all. This is because higher import fees must now be paid for sourcing the raw materials, which translates into higher production costs. Moreover, the principle of second sourcing is drastically complicated by the fact that different tariff rates are imposed for a multitude of different countries and markets: calculations become more complex, and the bureaucratic burden increases.

However, since the end product is possibly temporarily exempt from tariffs, the conclusion seems clear: as a manufacturer, it is preferable to continue producing abroad and at most accept tariffs when delivering the end product to the USA, rather than potentially facing a multitude of different import tariffs before manufacturing in the United States can even begin. In this case, the costs for basic manufacturing remain the same, and the export to the rest of the world is not hindered.

Near-Daily Changes Make Planning Almost Impossible

This back-and-forth approach of the United States in its tariff policy makes one thing apparent: the measures are not planned or thoughtfully devised in the long term but are instead carried out in a knee-jerk manner. The extended exemptions to the reciprocal tariffs were only implemented in response to criticism that revealed how much the new tariff regulations would impact the high-end technology sector, which is so important for the US economy. However, as this expansion further drastically exposed how much, precisely, the largest portion of imports from China would continue to enter duty-free, the course is once again drastically reversed.

For the American economy, this makes it nearly impossible to plan for the near future. Sven Henrich, founder and lead market strategist of the market analysis firm NorthmanTrader, expressed sharp criticism of the handling of the tariff issue on Sunday. "Sentiment check: The biggest rally of the year would come on the day Lutnick is fired," Henrich wrote on X. "I suggest the administration figure out who controls the message, whatever it is, as it changes every day. The American economy can't plan or invest with this constant back and forth."

Billionaire and investor Bill Ackman, who supported Trump's candidacy for the presidency, also urged the US President on Sunday to suspend the comprehensive and high reciprocal tariffs against China for three months, as Trump did last week for most countries. If Trump were to suspend the Chinese tariffs for 90 days and temporarily lower them to 10%, "he would achieve the same goal by encouraging US companies to shift their supply chains out of China without causing disruptions and risks," Ackman wrote on X.

U.S. Senator Elizabeth Warren, a Democrat, criticized the latest revisions to Trump’s tariff plan—warning, as many economists have, that it could slow economic growth and further fuel inflation.

"There is no tariff policy—just chaos and corruption," Warren said on ABC's "This Week" before Trump posted his latest social media message. Ray Dalio, the billionaire founder of the world's largest hedge fund, also joined the criticism. On NBC's "Meet the Press," Dalio expressed concern that the United States could slip into a recession or worse due to the tariffs. "Right now we are at a decision point and very close to a recession," Dalio said on Sunday. "And I'm worried about something worse than a recession if this is not handled well." (sg)

Chip production in the U.S.

President Trump threatens tariffs of up to 100% on semiconductors