Trump eyes 25% Tariffs on semiconductor chips

Donald Trump recently mentioned that he would impose tariffs of around 25% or more on semiconductor imports. An announcement will come as soon as 2nd April. 

The president’s recent comments at his Mar-a-Lago club specified various sectors for possible tariffs, including chips, pharma, and automotive. When reporters asked him about upcoming levies on semiconductor chips, Trump said, “It’ll be 25% and higher, and it’ll go very substantially higher over a course of a year.”

However, before announcing these new tariffs, he wants companies to have ample “time to come in.” He said, “When they come into the United States and they have their plant or factory here there is no tariff, so we want to give them a little bit of a chance.”

Due to increasing concerns of investors, stocks in NY declined when markets opened on Wednesday, with General Motors Co. sliding 1%.

As of yet, Trump did not mention whether these tariffs will be applied to specific countries.

Malaysia and Singapore are highly exposed to tariffs on chips

In the case of semiconductor chips, Malaysia and Singapore are probably the most exposed right now. In 2024, Malaysia exported $136 billion worth of semiconductors, becoming the sixth largest exporter.

Recently, Lawrence Wong, Singapore’s Prime Minister announced that the nation will invest $744.8 million for a new semiconductor Research and Development facility. Trump hinted at the levies on semiconductor chips just a few hours after this announcement.

Executives, lobby groups, and industry experts have warned that such tariffs can cause broad ripple effects in the industry, resulting in new costs and higher consumer prices.

Some countries have also promised to retaliate after the tariffs take effect.

How will these tariffs impact the AI industry?

After taking office, Republican lawmakers suggested ending the CHIPS and Science Act. Now, we’re looking at 25% tariffs or higher, on semiconductor chip imports.

Economists warn that such dual-pronged approach would potentially harm and slow down AI research in the US, and take away the nation’s competitive edge. This is because chip production and shortage of semiconductors is the biggest bottleneck for AI’s advancement.

The administration promised to support the construction of US chip foundries to reduce reliance on Asia. Washington considers it a security weakness. The Commerce Department pledged to give up to $6.6 billion to Taiwan Semiconductor Manufacturing Co. to expand its facilities in Arizona.

However, Trump says that TSMC does not need money to prioritize chip production in the United States. He said, “They needed an incentive. And the incentive is going to be they’re not going to want to pay at 25, 50 or even 100% tax.”

These tariffs could prove to be painful for both the consumers and manufacturers. Even giants like Nvidia could face higher costs despite having margins to absorb them for the time being.