Trump admin considers tariffs on foreign electronics based on number of chips — sources say, proposing duties tied to chips’ value: Reuters

Trump admin considers tariffs on foreign electronics based on number of chips — sources say, proposing duties tied to chips’ value: Reuters

The Trump administration is reportedly exploring the implementation of tariffs on foreign electronic devices based on the number of chips they contain, according to three sources familiar with the matter. The Commerce Department is considering imposing a tariff equal to a percentage of the estimated value of the product's chip content, aiming to encourage companies to shift manufacturing back to the United States .

The White House spokesperson, Kush Desai, emphasized the administration's goal to reduce reliance on foreign imports for semiconductor products, which are deemed essential for national and economic security. The proposed tariffs are part of a broader strategy that includes tax cuts, deregulation, and energy abundance to reshor critical manufacturing back to the United States .

If implemented, the plan could impact a wide range of consumer products, from toothbrushes to laptops, potentially driving up inflation. Economist Michael Strain of the American Enterprise Institute warned that the tariffs could exacerbate the current inflationary problem, which is already above the Federal Reserve's target of 2 percent .

Even domestically produced items could become more expensive due to the new tariffs on key inputs needed for their production. The Commerce Department had previously proposed exempting chipmaking tools from the tariffs to avoid raising the cost of producing semiconductors in the United States, but this proposal was reportedly displeased by the White House due to Trump's general distaste for exemptions .

The Trump administration has previously imposed tariffs on pharmaceuticals and semiconductors, citing national security concerns. However, the specifics of the new tariff plan, including the tariff rates and potential exemptions, remain unclear. The biggest non-US chipmakers include Taiwan Semiconductor Manufacturing Company and South Korea's Samsung Electronics .

The Commerce Department is reportedly considering a 25 percent tariff rate for chip-related content in imported devices, with 15 percent rates for electronics from Japan and the European Union. A dollar-for-dollar exemption based on investment in US-based manufacturing, provided companies move half their production to the United States, has also been eyed, although its feasibility remains uncertain .

The potential impact of these tariffs on the global electronics market and the broader economy is a subject of ongoing debate. As the Trump administration continues to explore this strategy, the business community and financial professionals will closely monitor the developments.