September 28 Update: Trump Administration Reportedly Weighing Far-Reaching Tariff Plan to Reduce U.S. Dependence on Foreign Semiconductors
According to sources familiar with the matter, the Trump administration is considering and formulating a new, far-reaching tariff plan aimed at significantly reducing U.S. reliance on foreign-manufactured semiconductors and incentivizing enterprises to relocate chip production lines back to the United States.
After a period of relative calm, U.S. President Donald Trump has implemented a series of tariff measures to boost U.S. manufacturing. On Thursday, he announced comprehensive new import tariffs, including a 100% tariff on branded pharmaceuticals and a 25% tariff on heavy-duty trucks, once again triggering fresh trade uncertainties.
As early as April this year, the Trump administration announced an investigation into imported pharmaceuticals and semiconductors, with the intention of imposing additional tariffs on them. The rationale cited was that over-reliance on foreign production poses a national security threat to these products.
Two Potential Chip Tariff Proposals
Currently, the Trump administration is considering two distinct chip tariff implementation plans, which are said to could be adopted either independently or in combination.
Proposal A: Tariffs on Imported Electronic Devices Based on Chip Value
Under this plan, the U.S. Department of Commerce is considering imposing a special tariff on imported electronic devices. The tariff amount will be calculated as a percentage of the estimated value of the chips contained within the products. This means consumer electronics with embedded chips—ranging from electric toothbrushes to laptops—could all become subject to taxation.
Sources familiar with the matter revealed that the Trump administration is initially considering a general 25% tariff on the chip value component of imported devices. For chips in electronic products from Japan and the European Union, the tariff rate may be set at 15%. However, these figures are preliminary and subject to adjustment.
Economists have warned that this move could significantly drive up consumer goods prices. Michael Strain, an economist at the American Enterprise Institute (a conservative think tank), pointed out that at a time when U.S. inflation is already significantly higher than the Federal Reserve’s 2% target and showing signs of accelerating, imposing such tariffs will exacerbate inflationary pressures.
Furthermore, even domestically produced U.S. goods may see price increases, as key components required for manufacturing local products could also be subject to the new tariffs.
Proposal B: "One-to-One" Production Matching and Punitive Tariffs
At the same time, the Trump administration is also considering another, more radical proposal. Its core goal is to require chip companies to match their U.S.-based production volume with the quantity of chips their customers import from overseas.
The heart of this policy is a long-term requirement for enterprises to maintain a 1:1 ratio between the number of chips manufactured domestically in the U.S. and the number of imported chips. Those failing to meet this standard will face punitive tariffs. Last month, President Trump stated that he would impose a roughly 100% tariff on semiconductors, but exempt companies that have committed to building factories in the U.S. or are in the process of constructing them.
To achieve this goal, the policy also includes incentive mechanisms. Companies that commit to building factories in the U.S. and set production targets (e.g., 1 million chips) will receive corresponding "credits," which can be used to import chips tariff-free during the construction phase of their new facilities. The policy may also include an initial transition period to give enterprises time to adjust and expand U.S. production capacity.
However, sources also indicated that a stricter exemption condition is under discussion: enterprises would be required to relocate half of their production capacity to the U.S. to qualify for tariff reductions based on their investment amounts.
New Tariffs Face Multiple Challenges and May Reshape the Industry Landscape
This ambitious plan to reshape global supply chains faces enormous complexity and severe challenges in terms of practical implementation.
The primary difficulty lies in the complexity of tracking and calculation. Chips have permeated every corner of the modern economy, from smartphones to automobiles, and their supply chains are extremely intricate. Many chips manufactured in the U.S. must be shipped overseas for packaging and integration before being imported back to the U.S. as part of final products. Against this backdrop, accurately tracking the origin of each chip and verifying its value for tariff calculation will be a massive undertaking.
Second, reports from The Wall Street Journal did not disclose how the U.S. government plans to "count" chips fairly: a high-end application processor for smartphones (such as Apple’s A19 Pro) and a high-performance AI accelerator (such as NVIDIA’s B300) differ vastly in complexity, cost, and value. A simplistic "one-for-one" quantitative standard fails to reflect these enormous differences and may lead to de facto unfairness.
Third, the policy will impose significant compliance pressure on tech giants like Apple and Dell. These companies will have to track the global origins of all chips in their products and coordinate with suppliers to meet the ratio requirements. However, the industry generally agrees that it is unrealistic to relocate the entire manufacturing process of complex products like iPhones back to the U.S.
Nevertheless, the policy may also reshape the industry landscape, granting stronger bargaining power to companies such as Intel, TSMC, and Micron—who have already aggressively expanded production capacity in the U.S. Their customers will be more inclined to purchase "Made in America" chips to avoid tariffs.
Pushing Manufacturing Reshoring via Tariffs: Outcomes Uncertain
The fundamental motivation behind the Trump administration’s promotion of this radical chip tariff policy stems from deep-seated concerns about national and economic security.
White House spokesperson Kush Desai explicitly stated: "The United States cannot rely on foreign imports for semiconductor products that are critical to our national and economic security. Through tariffs, tax cuts, deregulation, and energy advantages, the government is implementing a targeted, multi-faceted approach to bring critical manufacturing back to the United States."
Beneath this policy lies a long-standing strategic anxiety: the U.S. tech industry’s over-reliance on overseas chip manufacturing—especially production capacity concentrated in geopolitically sensitive regions—is seen as highly vulnerable to supply chain disruptions caused by conflicts or natural disasters.
This move is also a key part of its strategy to promote manufacturing reshoring. Although the CHIPS and Science Act of 2022 has provided substantial subsidies to encourage domestic manufacturing, market inertia has led customers to still prefer lower-cost overseas chips. The new tariff plan aims to reverse this trend through punitive measures and create mandatory market demand for "Made in America" chips.
However, the future of this plan remains uncertain. All current proposals are not yet finalized, and the White House has emphasized that relevant reports should be regarded as "speculation" before an official announcement. Moreover, many questions about chip tariffs remain unanswered: Which chip-containing products will be affected by the tariffs? What will the tariff rates be? Will any countries, products, or companies be granted exemptions?
There are also divisions within the government regarding the specific design of the policy. For example, the Department of Commerce once proposed exempting chip manufacturing tools from tariffs to reduce domestic production costs. However, this proposal was met with a cold response from the White House, as it contradicts President Trump’s long-standing stance against exemptions.
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