Trump says that chip tariffs are starting 'very soon'

For now, the sweeping import tariffs enacted by the U.S. government do not tax imports of semiconductors. Still, the Trump administration is preparing separate tariffs for sectors like semiconductors, pharmaceuticals, and possibly critical minerals. Apparently, Trump expects to impose tariffs on chips 'very soon.'

"The chips [tariffs] are starting very soon and the pharma is going to be starting to come in […] sometime in the near future," said President Trump at a White House briefing.

Earlier this year, Trump threatened to impose 25%, 50%, or 100% tariffs on semiconductors produced in Taiwan but remained quiet after TSMC committed to investing an additional $100 billion in its production capacity and an R&D center in the U.S.

However, after the sweeping tariffs imposed on goods from Europe, Japan, South Korea, and Taiwan made chipmaking tools 20%—32% more expensive for American chip producers and, therefore, increased their costs, it is logical for the U.S. government to impose tariffs on foreign semiconductors to somewhat level their competitive advantages over domestic chips in the American market.

It remains to be seen how the Trump administration's chip tariffs will look and whether there will be sweeping tariffs on all chip exports or some kind of differentiation.

Sweeping tariffs on all chips produced outside of the U.S. will hurt the best and most profitable American chipmakers, such as AMD, Broadcom, Intel, Nvidia, and Qualcomm, which make the lion's share of their products at TSMC in Taiwan.

For example, if there is a 25% tariff on an Nvidia AI GPU that the company sells for $50,000 with a 75% gross margin, then Nvidia will have to declare a value of $12,500 and pay an import duty of $3,125. Such a tariff will either hurt Nvidia's margins or make its GPUs more expensive for buyers in America. For Elon Musk's next-generation data centers, which are set to contain a million GPUs, this means $3.125 billion of additional costs.

Of course, there are cheaper products sold at a lower margin. For example, a $200 CPU is sold with a 40% - 50% gross margin across the supply chain. So, a 25% tariff will increase the retail price of such a CPU to $225 — a significant increase — if not absorbed by the CPU producer and the supply chain.

With the current sweeping 'reciprocal' tariffs set on exports from all the U.S. trade partners, the U.S. government used a straightforward method for setting the tariff: they divided the U.S. trade deficit with each country by the total value of imports from that country, according to numerous analysts (there is a graph proving this here). Hopefully, the Trump administration will use a more sophisticated method of calculating semiconductor import taxes.