United States President Donald Trump said on Wednesday, August 6, that he would impose a 100 per cent tariff on computer chips and semiconductors, but added that companies that manufacture computer chips in the country would be spared the tax. With the 100 per cent tariffs on computer chips and semiconductors, the prices of electronics, automobiles, household appliances, and other digital-age essentials are likely to rise.
Speaking at the Oval Office, Donald Trump said, “We’ll be putting a tariff on of approximately 100% on chips and semiconductors.”
“But if you’re building in the United States of America, there’s no charge.”
The development comes just after Donald Trump imposed an additional 25 per cent tariffs on Indian products for its purchases of Russian oil, bringing combined tariffs on the country to 50 per cent.
The tariffs are set to take effect in 21 days, giving India and Russia a window to negotiate with the administration over the import duties.
During the Covid-19 pandemic, a shortage of computer chips increased the price of autos and contributed to an overall uptick in inflation.
Demand for computer chips has been climbing worldwide, with sales increasing 19.6% in the year-ended in June, according to the World Semiconductor Trade Statistics organization.
Trump’s tariff threats mark a significant break from existing plans to revive computer chip production in the United States. He is choosing an approach that favors the proverbial stick over carrots in order to incentivize more production.
Essentially, the president is betting that higher chip costs would force most companies to open factories domestically, despite the risk that tariffs could squeeze corporate profits and push up prices for mobile phones, TVs and refrigerators.
By contrast, the bipartisan CHIPS and Science Act signed into law in 2022 by then-President Joe Biden provided more than $50 billion to support new computer chip plants, fund research and train workers for the industry. The mix of funding support, tax credits and other financial incentives were meant to draw in private investment, a strategy that Trump has vocally opposed.