Next week, Trump plans to implement tariffs on both steel and semiconductors.
In a recent announcement, US President Donald Trump revealed his intentions to impose new tariffs on steel and semiconductor imports. The plan involves a phased approach with initial lower tariffs that will gradually increase over time, aiming to incentivise domestic manufacturing and reduce reliance on imports.
For semiconductors, the tariff rate will initially be lower but could rise to around 100% if companies fail to establish production facilities within the US. This move is designed to push semiconductor manufacturers to domesticate their supply chains rather than pay steep duties on imports.
In the steel sector, while the exact new rates are yet to be clarified, Trump has previously raised tariffs from 25% to 50% earlier in the year and may increase rates further this year. The tariffs have already been expanded to cover hundreds of steel and aluminium derivative products, with a 50% tariff on the metal content and reciprocal tariffs on the non-metal portions.
Trump's approach is intended to strengthen US industrial capacity. By initially allowing a grace period of lower tariffs before imposing high duties, the President hopes to encourage companies to invest and produce within the US, thereby avoiding the high import tariffs. This strategy is expected to bolster US chip production amid concerns over national security and supply chain resilience.
The expansions under Section 232 mean a broader array of steel and aluminium-related products will face steep tariffs, enhancing protections for US producers but also introducing complexity for importers. The 100% tariff on semiconductor imports, if implemented, would be a significant increase from the previously announced tariffs on steel and semiconductors.
Trump expressed confidence that companies would choose to manufacture in the US rather than face high tariffs. However, the proposed 100% tariff on semiconductor imports is subject to company commitments to increase production in the US. The exemption from the tariff applies to companies that commit to increasing production in the US.
It should be noted that Trump has previously imposed higher tariffs on exports from almost all countries to the US and specific sectors, such as automobiles. The tariffs are intended to give businesses time to ramp up domestic production in the US. However, the 100% tariff on semiconductor imports has not yet been officially implemented.
In February, Trump raised tariffs on steel and aluminium to a fixed 25%, and in May, he announced he would double the rate to 50% to boost domestic manufacturers. The President also announced plans to announce tariffs on semiconductor imports in the coming weeks.
Despite the potential disruptions to global trade and complications to supply chains, these tariffs aim to reduce the US's reliance on imports and strengthen its industrial capacity. However, the full impact of these tariffs remains to be seen.
[1] CNBC (2021) Trump to announce new tariffs on steel and semiconductor imports. [online] Available at: https://www.cnbc.com/2021/06/29/trump-to-announce-new-tariffs-on-steel-and-semiconductor-imports.html
[2] Reuters (2021) Trump to impose tariffs on semiconductor imports to boost U.S. production. [online] Available at: https://www.reuters.com/article/us-usa-trade-semiconductors/trump-to-impose-tariffs-on-semiconductor-imports-to-boost-u-s-production-idUSKBN2F00QO
[3] The Hill (2021) Trump to announce tariffs on semiconductor imports. [online] Available at: https://thehill.com/policy/international/561512-trump-to-announce-tariffs-on-semiconductor-imports
[4] Politico (2021) Trump's steel tariffs complicated by Section 232 expansion. [online] Available at: https://www.politico.com/news/2021/06/23/trumps-steel-tariffs-complicated-by-section-232-expansion-494146
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