SINGAPORE: US President Donald Trump has threatened tariffs of up to 100 per cent on US imports of semiconductors. In another unprecedented move, Nvidia and AMD are now required to give the US government 15 per cent of their revenues from chip sales to China.
These two decisions target the high-tech sector, which is crucial for the US economy but also central to many countries due to its impact on growth and its role in complex supply chains. Where do we go from here?
Let’s take a step back and acknowledge that no tariff decision is final under the current administration. Starting with initial tariffs on Canada, Mexico and China, followed by the shock of Liberation Day, a pause and a slow succession of bilateral trade deals, we find ourselves with the most complex tariff structure the US has had in decades. There are not only different rates by country or goods, but also a growing list of exemptions for individual companies.
To make matters worse, some of these tariffs can easily change based on the seemingly volatile will of the US president. The recent increase in tariffs on Brazilian and Indian imports, explicitly motivated by political reasons, is an example of what could happen to other countries in the future.
In this context, US tariffs on the high-tech sector should be taken with a grain of salt. As of today, they are merely announcements that have yet to be fully implemented.
Additionally, exemptions have already been announced for companies that produce in the US or “plan to do so”. Following a meeting between Apple CEO Tim Cook and President Trump, Apple was granted an exemption from the tariff on imported semiconductors.
Other companies in Asia, such as TSMC in Taiwan and Samsung in South Korea, believe that they should be exempted as well because of their presence or commitments in the US. Given recent history, it would not be surprising if Trump requested additional efforts or commitments from some of these companies in exchange for exemption from these tariffs.
