US Ponders Tariff to Cut 'Over-Reliance on Top Chips From Taiwan'

The Trump administration is weighing a radical rejig of its tariffs on foreign electronic devices based on the number of chips in each one, three sources have claimed.

The plan appears to stem from two factors – concern about over-reliance on Taiwan, which produces the bulk of the world’s most advanced chips – but could face a takeover by Beijing in coming years, and the White House’s strong desire to force companies to shift more chipmaking to the United States.

US Treasury Secretary Scott Bessent told Fox Business on Sept 24 that the Trump Administration was seeking to “de-risk on China” in regard to products ranging from rare earths to chemicals and more. Then, in an interview with Reuters on the same day, he described the US’s reliance on Taiwan for advanced computer chips as “the single greatest point of failure for the world economy.”

ALSO SEE: EU Set to ‘Hit China With 20 Anti-Dumping Probes’ – SCMP

“The single greatest point of failure for the world economy is that 99% of the high-performance chips are produced in Taiwan,” Bessent said, according to a Reuters report last week.

“They do a great job, they have a wonderful ecosystem, but in terms of risk management, I do not know whether it is 30%, 40%, 50% of our needs, [but] we have got to bring back to the US or our allies, whether it is Japan or the Middle East, and we are working on that every day.”

Under the latest plan, revealed by three sources and published on the weekend, which could still change, the Commerce Department would impose a tariff equal to a percentage of the estimated value of the product’s chip content.

“America cannot be reliant on foreign imports for the semiconductor products that are essential for our national and economic security,” White House spokesperson Kush Desai said when asked about the details.

“The Trump administration is implementing a nuanced, multi-faceted approach to reshoring critical manufacturing back to the United States with tariffs, tax cuts, deregulation, and energy abundance.”

If implemented, the plan would show the Trump administration is seeking to hit a wide range of consumer products, from toothbrushes to laptops, potentially driving up inflation as it seeks to ramp up US manufacturing.

The plan could push up the cost of consumer goods “at a time when the US has an inflationary problem, with inflation clearly above the Fed’s target and accelerating,” Michael Strain, an economist with the conservative American Enterprise Institute, said. The Federal Reserve’s target inflation rate is 2%.

Even domestically produced items would likely become more expensive, thanks to new tariffs on key inputs needed to make those goods, Strain added.

The Commerce Department did not immediately respond to requests for comment.

Bid to bolster manufacturing

US President Donald Trump has deployed an array of tariffs aimed at bolstering American manufacturing, announcing on Thursday sweeping new import tariffs, including 100% duties on branded drugs and 25% levies on heavy-duty trucks, triggering fresh trade uncertainty after a period of relative calm.

In April, the Trump administration announced probes into imports of pharmaceuticals and semiconductors as part of a bid to impose tariffs on them, arguing that extensive reliance on their foreign production poses a national security threat.

But questions have swirled about the universe of products containing chips that would be hit by the tariffs, the tariff rates, and whether any countries, products, or companies would be exempt.

Trump said in August that the United States would impose a tariff of about 100% on imports of semiconductors, but exempted companies that are manufacturing in the US or have committed to do so.

The biggest chipmakers outside the US include Taiwan Semiconductor Manufacturing Co (TSMC) and South Korea’s Samsung Electronics.

15-25% tariff

One of the sources consulted by Reuters said the Commerce Department was considering a 25% tariff rate for chip-related content in imported devices, with 15% rates for electronics from Japan and the European Union, stressing the figures were preliminary.

The sources added that the Commerce Department has also eyed a dollar-for-dollar exemption based on investment in US-based manufacturing only if a company moves half its production to the US, but it was unclear how it would work or whether it would move forward. The investment exemption was previously reported by the Wall Street Journal.

The Commerce Department had previously proposed to exempt chipmaking tools from the tariffs, three sources said, to avoid raising the cost of producing semiconductors in the United States and undermining Trump’s reshoring goals.

But the people said the White House was displeased by the carve-out, citing Trump’s general distaste for exemptions.