U.S. Trade Tensions with China Hit Fever Pitch

Estimated reading time: 2 minutes

Following through on his 2016 campaign promise, President Trump is implementing trade policies that buck conventional wisdom in Washington, D.C. and among U.S. businesses. Stiff tariffs and the dismantling of longstanding trade agreements—cornerstones of these new actions—will ripple through the semiconductor industry with particularly damaging effect. China, a chief target of criticism from President Trump, has again found itself in the crosshairs of the administration, with trade tensions rising to a fever pitch. 

The Trump Administration has long criticized China for what it considers unfair trade practices, often zeroing in on intellectual property. In August 2017, the Office of the U.S. Trade Representative (USTR), charged with developing and recommending U.S trade policy to the president, launched a Section 301 investigation into whether China’s practice of forced technology transfer has discriminated against U.S. firms. As the probe continues, it is becoming increasingly clear that the United States will impose tariffs on China based on its current findings. Reports suggest that the tariffs could come soon, hitting a range of products from consumer electronics to toys. Other measures could include tightening restrictions on the trade of dual-use goods—those with both commercial and military applications—curbing Chinese investment in the United States, and imposing strict limits on the number of visas issued to Chinese citizens. 

With China a major and intensifying force in the semiconductor supply chain, raising tariffs hangs like the Sword of Damocles over the U.S. and global economies. A tariff-ignited trade war with China could stifle innovation, undermine the long-term health of the semiconductor industry, and lead to unintended consequences such as higher consumer prices, lower productivity, job losses and, on a global scale, a brake on economic growth.

Other recently announced U.S. trade actions could also cloud the future for semiconductor companies. The Trump administration, based on two separate Section 232 investigations claiming that overproduction of both steel and aluminum are a threat to U.S. national security, recently levied a series of tariffs and quotas on every country except Canada and Mexico. While these tariffs have yet to take effect, the mere prospect has angered U.S. trading partners – most notably Korea, the European Union and China. Several countries have threatened retaliatory action and others have taken their case to the World Trade Organization. 

Trade is oxygen to the semiconductor industry, which grew by nearly 30% last year and is expected to be valued at an estimated $1 trillion by 2030. Make no mistake: SEMI fully supports efforts to buttress intellectual property protections. However, the Trump administration’s unfolding trade policy could antagonize U.S. trade partners. 

For its part, SEMI is weighing in with USTR on these issues, underscoring the critical importance of trade to the semiconductor industry as we educate policymakers on trade barriers to industry growth and encourage unobstructed cross-border commerce to advance semiconductors and the emerging technologies they enable. On behalf of our members, we continue our work to increase global market access and lessen the regulatory burden on global trade. If you are interested in more information on trade, or how to be involved in SEMI’s public policy program, please contact Jay Chittooran, Public Policy Manager, at jchittooran@semi.org.