Trump Imposes Narrow 25% Tariff on A.I. Chips Re-Exported to
China, Spares Wider Semiconductor Industry
The tariffs will allow President Trump to
take a cut of Nvidia’s chip sales to China while putting off a decision about imposing
higher taxes on the chip industry.
President
Donald Trump has announced a limited 25% tariff on a narrow category of
foreign-made artificial intelligence chips, primarily targeting high-end
products from companies such as Nvidia and AMD that are imported into the U.S.
and then re-exported to China. The measure, effective immediately, allows the
U.S. government to collect revenue from lucrative A.I. chip sales to China
while avoiding broad-based tariffs on the global semiconductor industry.
The
tariff does not apply to chips used domestically in U.S. data centers, consumer products, industry, or government, nor
does it affect most semiconductor imports. The administration framed the move
as part of a national security review under Section 232, but critics argue it
does little to incentivize domestic chip manufacturing and mainly serves as a
workaround to legally tax Nvidia’s China sales.
While
the White House left open the possibility of broader semiconductor tariffs in
the future—along with potential relief for firms that manufacture in the
U.S.—the limited approach was welcomed by chipmakers wary of price increases
and supply chain disruptions. The administration also concluded a Section 232
investigation into critical minerals, opting for trade negotiations rather than
tariffs for now.
Overall,
the decision reflects a balancing act: extracting revenue and signaling toughness on China without provoking foreign
governments, destabilizing the chip industry, or driving up prices across the
U.S. economy.
President
Trump signed a proclamation on Wednesday to impose a 25 percent tariff on a narrow
list of foreign semiconductors, providing a way for the government to earn revenue
off the sale of lucrative chips used in artificial intelligence.
The
tariff, which would take effect Thursday, is far more limited than what the president
initially threatened. Last year, the administration began an investigation aimed
at encouraging tech companies and chip makers to buy semiconductors made in America.
But instead of approving sweeping tariffs that would affect the industry, the administration
settled on Wednesday for narrower levies that allow it to take a cut of artificial
intelligence chips sold to China.
A
document released by the White House said a 25 percent tariff would be put on A.I.
chips made by companies like Nvidia and AMD that are imported into the United States
and then re-exported to other countries. The tariff would not apply to semiconductors
that are brought into the country to be used domestically in data centers or in products for American consumers, industry or the
government. But it would allow the U.S. government to collect revenue from the sale
of A.I. chips to China, an idea Mr. Trump proposed last year.
The
president may still impose broader tariffs on semiconductor imports and products
containing them in the near future, the White House said, including a program that
would provide tariff relief for companies that manufacture chips domestically.
For
now, though, the arrangement will likely be welcomed by major chip companies that
have lobbied fiercely to limit the scope of tariffs. Most chip companies manufacture
the bulk of their products in Taiwan or East Asia, where many of the world’s electronics
are made, and ship them into the United States only if they are to be used domestically.
Mr.
Trump threatened last August to impose a 100 percent tariff on foreign semiconductors
unless manufacturers committed to invest in the United States. But chip tariffs
had the potential to rankle foreign governments, as well as many of the tech companies
that have grown close with the president. The administration has been particularly
cautious of disrupting a trade truce that it reached last year with China, a major
manufacturer of semiconductors.
The
announcement on Wednesday avoided any such impacts, while also allowing Mr. Trump
to realize his plans to take a 25 percent cut of the revenue that Nvidia, the A.I.
chip giant, will make from selling advanced chips to China.
Mr.
Trump first floated the plan in August but was forbidden by U.S. law to tax exports
or export licenses. So administration officials proposed
a circuitous solution where they would bring Nvidia chips manufactured in Asia into
the United States and impose a 25 percent tariff on the imported chip, before re-exporting
the products to China.
On
Tuesday, the Department of Commerce issued a rule to permit the sale of a more advanced
A.I. chip made by Nvidia, the H200, to China. It remains unclear, however, whether
the Chinese will want to buy the chips. Beijing has reportedly limited access to
the H200 chips despite Mr. Trump’s approval.
Mr.
Trump had banned the sale of the H200 last year out of national security concerns,
but abruptly reversed himself after Nvidia argued that exporting the chips was important
for American global technology leadership. Nvidia’s chief executive, Jensen Huang,
has become one of Mr. Trump’s closest allies in the tech world.
Peter
Harrell, a fellow at the Carnegie Endowment for International Peace who was a member
of President Joseph R. Biden Jr.’s National Security Council staff, said the Trump
administration had done a serious evaluation of the national security risks of relying
on foreign semiconductor manufacturers, but had stopped short of taking action to
address those vulnerabilities.
“This
will do absolutely nothing to create an incentive for U.S. manufacturing and seems
to be designed solely to create a legal mechanism to tax Nvidia sales to China,”
Mr. Harrell said.
Mr.
Trump started the chips inquiry under a national security-related law known as Section
232, which he has used to apply tariffs to other sectors, including a 50 percent
tariff on all steel imports and a 25 percent tariff on all imported cars.
The
White House also said Wednesday that it had concluded a Section 232 investigation
into critical minerals, including lithium, gallium, germanium, cobalt and nickel.
An executive order said the administration would refrain from putting tariffs on
mineral imports for now. Instead, the order directed officials to negotiate trade
agreements that would provide the United States more access to critical minerals.
The United States is heavily reliant on other countries — including China — for
those minerals, which are used in cars, airplanes and A.I. data centers.
Some
analysts have questioned whether the Trump administration is backing away from heftier
tariffs amid rising concerns among Americans about affordability. High prices were
a key issue that helped propel Democrats to electoral wins in November. In an economic
speech on Tuesday, Mr. Trump called affordability a “fake word by Democrats” but
also detailed various steps his administration had taken to lower prices.
Because
semiconductors are in almost everything with an on-off switch, chip companies had
warned the administration that more expansive tariffs could lead to widespread price
increases across the American economy. Others have told the administration that
a 25 percent surcharge on the machinery they need to manufacture chips, which can
cost tens or hundreds of millions of dollars, would make semiconductor factories
in the United States unviable.
Last
year, the United States imported roughly $45 billion in semiconductor chips, primarily
from Taiwan and Malaysia, according to Bernstein Research.
Mr.
Trump had said companies that committed to building in the United States wouldn’t
pay tariffs. Last year, the chief executives of Apple, Nvidia and Taiwan Semiconductor
Manufacturing Company, the world’s largest semiconductor manufacturer, pledged more
than $1 trillion in U.S. investments as they sought to avoid fees. Commerce Department
employees have been working on an arrangement that would offer tariff exemptions
to companies that invest domestically.
Semiconductor
companies have been forced to accept uncertainty under Mr. Trump. Since returning
to office, he has threatened to take away government grants, restricted chip sales
to China before reversing those limits, demanded investments and recommended that
one company, Intel, fire its chief executive.
The
intrusions have paralyzed an industry that less than a year earlier signed contracts
with the Biden administration to release tens of billions of dollars in subsidies
to build factories. Mr. Trump immediately put the industry on edge by criticizing
those programs as wasteful, and had his staff ask firms for more investments before
releasing the money.
But
Mr. Trump has also seemed attuned to the concerns of tech C.E.O.s, particularly
Mr. Huang and Apple’s chief executive, Tim Cook. In April, the administration gave
the technology industry a lucrative carve-out from its global tariffs, saying electronics
would soon be subject to other tariffs under Section 232. No other industry has
received such a broad exemption.