On 05 April 2025, President Trump has announced the latest round of trade tariffs, targeting a wide range of goods from most of the United States’ trading partners, with a particular impact on the retail sector. However, to many investors’ surprise, the recent press conference outlining the specifics notably excluded one major industry: semiconductors.
Yet on 14 April 2025, the Trump administration is getting ready to impose tariffs on semiconductors and pharmaceuticals, revealing that it is moving in the direction with national security investigations into imports from these sectors, according to what was seen from the notices in the Federal Register.
While this development comes as the global trading are still adjusting to the series of levies that President Trump has installed and sometimes withdrawn over a short span period of less than two weeks. This is rocking the financial markets.
Pharmaceuticals and semiconductors have been exempt from 10% tariffs set on most imports starting 05 April 2025, but President Trump had said they would get separate duties.
In this article I would like to examine the possibility of the U.S. semiconductor sector being spared from tariffs based on the historical trends and strategic considerations, or if tariffs is imposed will it be significant or targeted more onto the low end spectrum of the semiconductor.
Possibility Is Low To Moderate
The possibility of the U.S. semiconductor sector being spared from tariffs is low to moderate, based on historical trends and strategic considerations.
Here is a breakdown of the key factors and we shall examine them one by one.
Strategic Importance and National Security
Semiconductors are critical to U.S. technological leadership, defense systems, and infrastructure (e.g., AI, 5G).
The CHIPS and Science Act (2022) prioritizes domestic production through subsidies rather than tariffs, signaling a focus on investment over trade barriers.
National security concerns have historically led to targeted actions (e.g., export controls on advanced chips to China) rather than broad tariffs.
If we looked at the percentage of U.S. headquartered firm in the semiconductor and wafer manufacturing we can see that the impact of tariffs in the countries like Singapore is only 10%, and they have a significant percentage so the semiconductor sector tariffs might be used to target more appropriately on the sector.
Past Tariff Exemptions
In the 2018–2019 U.S.-China trade war, some semiconductor-related products faced tariffs but later received exemptions due to:
Lack of domestic supply.
Industry lobbying (e.g., companies like Intel and Qualcomm argued tariffs would raise costs and disrupt supply chains).
The U.S. has often excluded "strategic goods" from tariffs when they are vital to other industries (e.g., medical devices, tech hardware).
We can see from the $Philadelphia Semiconductor Index(SOX)$ and S&P 500 that the semiconductors sector is being punished by the tariffs.
Global Supply Chain Dependencies
The U.S. relies on imports for ~30% of its semiconductors, notably from Taiwan ( $Taiwan Semiconductor Manufacturing(TSM)$ ) and South Korea ( $Samsung Electronics Co., Ltd.(SSNGY)$ ). Tariffs could disrupt supply chains for U.S. manufacturers (e.g., automakers, consumer electronics).
One significant impact on chips have been on $NVIDIA(NVDA)$ .
Retaliatory tariffs from trade partners (e.g., China, EU) could harm broader U.S. exports. If we looked at the revenues from the chip industry, there is still a possibility of it hitting US$1 trillion in 2030.
Alternative Policy Tools
The U.S. has preferred export controls (e.g., restricting advanced chipmaking equipment to China) and investment restrictions (e.g., CFIUS reviews) over tariffs to address competition with China.
Sanctions on entities like Huawei and SMIC reflect a targeted approach rather than blanket tariffs.
Risk of Escalation
Tariffs on semiconductors could provoke retaliation against U.S. tech firms or agricultural exports, which policymakers may seek to avoid.
Exceptions
If tariffs are imposed, they would likely focus on specific segments, such as:
Lower-end chips from China (e.g., legacy semiconductors where China is expanding production).
Products deemed to benefit from "unfair subsidies" or IP theft.
What Happen During The Last Tariffs Implementation In 2018
In 2018, tariffs initially included some semiconductor products but faced industry pushback. Exemptions were granted for items with no domestic alternative.
The Biden administration retained Section 301 tariffs on China but emphasized exemptions for critical goods.
Summary
While the semiconductor sector is not immune to tariffs—especially in targeted scenarios—the strategic prioritization of domestic production, supply chain vulnerabilities, and reliance on alternative tools make broad tariffs unlikely.
However, narrowly tailored tariffs on specific Chinese semiconductor products (e.g., legacy chips) could occur as part of efforts to counter China's industrial policies. The sector’s overall sparing would depend on ongoing geopolitical dynamics and industry lobbying efforts.
Appreciate if you could share your thoughts in the comment section whether you think there might be a turnaround of the tariffs on semiconductor.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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