President Trump signed a proclamation on Wednesday imposing a 25 percent tariff on a limited list of foreign semiconductors, giving the government a way to generate revenue from sales of lucrative artificial intelligence chips.
The tariff, which would take effect Thursday, is far more limited than what the president initially threatened. Last year, the government launched an investigation aimed at encouraging technology companies and chipmakers to buy American-made semiconductors. But instead of approving sweeping tariffs that would impact the industry, the government on Wednesday agreed to lower levies that would allow it to pocket a portion of artificial intelligence chips sold to China.
A document released by the White House said a 25 percent tariff would be imposed on AI chips from companies like Nvidia and AMD that are imported into the U.S. and then re-exported to other countries. The tariff would not apply to semiconductors imported into the country for use in data centers or in products for American consumers, industry or the government. But it would allow the U.S. government to generate revenue from selling AI chips to China, an idea Mr. Trump proposed last year.
The president could impose even 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 make chips domestically.
For now, however, the deal is likely to be welcomed by major chipmakers, which have lobbied hard to limit the scope of tariffs. Most chipmakers make the majority of their products in Taiwan or East Asia, where much of the world’s electronics are made, and ship them to the United States only when they are to be used domestically.
Mr. Trump threatened last August to impose a 100 percent tariff on foreign semiconductors unless manufacturers committed to investing in the United States. But chip tariffs had the potential to anger foreign governments and many of the tech companies close to the president. The government has been particularly cautious about disrupting the trade peace it struck last year with China, a major semiconductor maker.
Wednesday’s announcement prevented such fallout while allowing Mr. Trump to carry out his plans to cut AI chip giant Nvidia’s revenue from sales of advanced chips to China by 25 percent.
Mr. Trump first floated the plan in August, but he was prohibited by U.S. law from taxing exports or export licenses. So government officials proposed a cumbersome solution in which they would bring Asian-made Nvidia chips into the United States and impose a 25 percent tariff on the imported chips before re-exporting the products to China.
On Tuesday, the Commerce Department issued a rule allowing the sale of a more advanced AI chip from Nvidia, the H200, to China. However, it remains unclear whether the Chinese want to buy the chips. Beijing has reportedly restricted access to the H200 chips despite Mr Trump’s approval.
Mr. Trump had banned sales of the H200 last year on national security grounds, but abruptly reversed course after Nvidia argued that exporting the chips was important to America’s global technology leadership. Nvidia boss Jensen Huang has become one of Mr Trump’s closest allies in the technology world.
Peter Harrell, a fellow at the Carnegie Endowment for International Peace and a staffer on President Joseph R. Biden Jr.’s National Security Council, said the Trump administration has seriously considered the national security risks posed by reliance on foreign semiconductor makers but has taken no action to address those vulnerabilities.
“This will provide absolutely no incentive for manufacturing in the U.S. and appears designed solely to create a legal mechanism to tax Nvidia sales to China,” Harrell said.
Mr. Trump launched the chip investigation under a national security law called Section 232, which he has used to impose tariffs on 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 completed a Section 232 investigation into critical minerals, including lithium, gallium, germanium, cobalt and nickel. An executive order said the government would refrain from imposing tariffs on mineral imports for the time being. Instead, the order directed officials to negotiate trade deals that would give the United States greater access to critical minerals. The United States is heavily dependent on other countries – including China – for the minerals used in cars, airplanes and AI data centers.
Some analysts have questioned whether the Trump administration will back away from higher tariffs amid growing concerns among Americans about affordability. High prices were a key issue that helped Democrats win elections in November. In an economic speech on Tuesday, Trump called affordability a “Democratic false word” but also detailed several steps his administration has taken to lower prices.
Since semiconductors are in almost everything with an on-off switch, chipmakers had warned the government that more expansive tariffs could lead to widespread price increases across the American economy. Others have told the government that a 25 percent surcharge on the machines they need to make chips, which can cost tens or hundreds of millions of dollars, would make semiconductor factories in the United States unprofitable.
The U.S. imported about $45 billion worth of semiconductor chips last year, mostly from Taiwan and Malaysia, according to Bernstein Research.
Mr. Trump had said that companies that commit to building in the United States would not pay tariffs. Last year, the chief executives of Apple, Nvidia and Taiwan Semiconductor Manufacturing Company, the world’s largest semiconductor maker, pledged more than $1 trillion in U.S. investments to avoid fees. Commerce Department officials have been working on an agreement that would grant tariff exemptions to companies that invest domestically.
Under Mr. Trump, semiconductor companies have been forced to accept the uncertainty. Since returning to office, he has threatened to cut government subsidies, restricted chip sales to China before lifting those restrictions, called for investment and recommended that one company, Intel, fire its chief executive.
The interventions have crippled an industry that less than a year earlier had signed deals with the Biden administration to release tens of billions of dollars in subsidies to build factories. Mr. Trump immediately angered the industry by criticizing these programs as wasteful and having his aides beg companies for more investment before releasing the money.
But Mr. Trump also seemed sensitive to the concerns of technology CEOs, particularly Mr. Huang and Apple Chief Executive Tim Cook. In April, the government gave the tech industry a lucrative exemption from its global tariffs and said electronics would soon be subject to other Section 232 tariffs. No other industry has received such a comprehensive exemption.