The Trump administration took action Monday, adding it to the taxes that President Trump has imposed worldwide imports.
The federal notice said it was issued online Monday afternoon. The administration said it has launched a national security investigation into chips and drug imports. Trump suggests that these investigations could cause tariffs.
The survey also covers machines used to manufacture products containing semiconductors, chips and pharmaceutical ingredients.
In a statement confirming the move, White House spokesman Kush Desai said the president has “long been clear about the importance of reusing manufacturing, which is important to our country's national and economic security.”
New semiconductor and drug tariffs will be issued under section 232 of the Trade Expansion Act of 1962. This allows the president to impose tariffs to protect the national security of the United States.
Earlier in the day, Trump suggested he would soon impose new tariffs on semiconductors and drugs as he sought to bolster more domestic production.
“The higher the tariffs, the faster they get,” Trump told reporters in a White House appearance, citing the import taxes he imposed on iron, aluminum and cars.
Semiconductors are used to power electronics, cars, toys and other products. The US relies heavily on chips imported from Taiwan and elsewhere in Asia. This is the trust Democrats and Republicans have similarly described as a major national security risk.
As for drugs, Trump claimed that too many important drugs had been imported. “We're not making our own medicine anymore,” he said.
China, Ireland and India are important sources of certain medicines, but some medicines are produced at least in part in the United States.
Trump also signaled Monday that he could provide relief for certain businesses from his tariffs, as he did for recent electronics imports.
“We're looking at something to help some of the car companies that are switching to parts made in Canada, Mexico and elsewhere,” the president said. He added, “And they have to make them here, so they need a little time.” Shares of General Motors, Ford Motor and Stellantis jumped out after his comments.
“I'm a very flexible person. I won't change my mind, but I'm flexible,” Trump said Monday when asked about possible exemptions. He spoke with Apple's CEO Tim Cook and added that he recently “helped” him.
The president announced a major change in his trade agenda last week. This has shocked companies that are trying to shake the market and convince them to invest in the US.
Trump announced a global “mutual” tariff program on April 2, including high taxes in countries that manufacture many electronic devices, such as Vietnam. However, after the bond market turmoil, he suspended these global tariffs for 90 days so that the government could negotiate trade with other countries.
These import taxes came in addition to other tariffs Trump has imposed on various sectors and countries, including a 10% tariff on all US imports. 25% tariff on steel, aluminum and cars. 25% tariff on many goods from Canada and Mexico. Overall, the move has increased US tariffs to levels not seen in more than a century.
Amidst nausea with China, Trump raised tariffs on China's imports to an eye-catching minimum of 145% last week on Friday before waiving smartphones, laptops, televisions and other electronic devices. These products account for about a quarter of US imports from China.
The administration argued that the move was merely “clearing” and that these electronic devices would fall within the scope of a national security investigation into the chip.
But industry executives and analysts have questioned whether it's about avoiding a backlash that has led to a sharp rise in prices for many appliances, or whether it's about tech companies like Apple reaching out to the recent White House to aid tariffs in claiming tariffs are harmful to them.
Trump has already used his legal authority under Section 232 to issue tariffs on imported steel, aluminum and automobiles. The administration is also using agencies to conduct investigations into the imports of wood and copper.
According to a notification on Monday, the administration said it began an investigation into drug and semiconductor imports on April 1. Both the White House and the president said the process had officially begun.
Kevin Hassett, director of the White House National Economic Council, told reporters Monday that tip fees are necessary for national security.
“The example I want to use is that if you have a cannonball but you're getting a cannonball from an enemy, if there's any action, you might run out of cannonball,” he said. “And you can put tariffs on Cannonball.”
Trump argues that tariffs on tips will force businesses to move factories to the US.
Some tech companies are responding to the president's demands to build more in the US. Taiwanese semiconductor manufacturer, the world's largest chip maker, announced in March that it would spend $100 billion over the next four years at the White House to expand its production capacity.
Apple has announced that it will spend $500 billion in the US to expand its facilities nationwide over the next four years.
On Monday, chip maker Nvidia announced that it will produce a fully-built, artificial intelligence supercomputer in the United States. Over the next four years, the company said it will work with TSMC and other companies to produce up to $500 billion in AI infrastructure in the US.
“The first time the world's AI infrastructure engine is being built in the US,” Nvidia CEO Jensen Huang said in a statement.
The White House blasted the news with an announcement that praised the president.
“It's the Trump effect in action,” the statement said, “overseeing these industries is good for American workers, good for the American economy, good for American national security – and the best hasn't come yet.”
However, some critics have questioned how much tariffs really help strengthen the US industry, given the Trump administration threatens to pull back grants given to chip factories by the Biden administration. And foreign governments such as China, Japan, South Korea and Taiwan all use tools such as grants and tax credits to subsidize semiconductor manufacturing.
105 new chip factories, or fabs, are expected to be online until 2028, according to data compiled by Semi, the association of global semiconductor suppliers. Of them, 15 are planned in the US, with the bulk in Asia.
Trump criticizes the Chips Act, a $50 billion program established under the Biden administration, and aims to provide incentives for chip manufacturing in the United States. He called grants a waste of money and argued that tariffs alone were enough to promote domestic chip production.
Jimmy Goodrich, senior advisor to RAND Corporation for Technology Analysis, said tariffs could be effective.
“However, it is important to work with allies as the US only accounts for about a quarter of the global demand for products that contain chips.”
Management staff suggest that chip tariffs can be applied to semiconductors coming to the US within other devices. Most chips are not imported directly. Rather, they are assembled into Asian or Mexican electronics, toys and automotive parts before being shipped to the US.
Although the US does not have a system to apply tariffs to chips wrapped in other products, the US Trade Representative began to consider this question during the Biden administration. Chip industry executives say that such a system is difficult but possible, but it is possible.
Rebecca Robbins I contributed a report from Seattle.
