Chip industry blasts 25% tariff on chips and parts imported from China

The Semiconductor Industry Association is seeking a reversal of Trump era tariffs on chips and components from China that SIA says are “exacerbating the ongoing chip shortage and slowing our economy.”

In comments submitted Dec. 1 to the Office of the U.S. Trade Representative, SIA said the tariffs are “leading to higher prices and worsening damage to U.S. consumers and manufacturers of autos, appliances, medical equipment, and other U.S. industrial and technology products.”

In October, the USTR under President Biden opened a comment period to consider whether to reinstate products excluded from a list of products imported to the U.S. from China that are subject to a 25% tariff.

That list includes relatively inexpensive printed circuit boards, splice connectors and ring terminals, but SIA wants to add dozens of other electronics components that had never been excluded from the tariffs such as diodes, transistors, storage devices and machine tools essential to chip manufacturing coming from China.

Ironically, SIA noted that most of the chips imported from China were developed and manufactured at plants owned and operated by U.S. semiconductor companies there. “U.S. semiconductor companies are harmed rather than indigenous Chinese semiconductor companies,” SIA said in its submission.

SIA represents 98% of all U.S. semiconductor companies. Some of the products in question were granted exclusions from tariffs, but the exclusions were allowed to expire under the Trump Administration. “This situation was not helped by the previous Administration’s decisions to deny or terminate product exclusions covering key semiconductor…categories,” SIA said.

Semiconductor-related products from China fell from $2.5 billion in 2017, then  tariffs were first imposed in 2018 and the number fell  to $1.5 billion in 2020, SIA noted.

“The tariffs are raising U.S. manufacturing costs in a wide range of downstream sectors that rely on semiconductor technology, including the very industry sectors listed in the Made in China 2025 plan that the 301 tariffs are meant to assist: ICT, robotics, industrial machinery, new materials and electric vehicles,” the submission said. “The tariffs boost the cost of manufacturing industrial and technology product in the U.S., disrupt industrial supply chains and undermine the [Biden] Administration’s Build Back Better goal of bringing production and jobs back to this country and expanding high-wage opportunities for American workers.”

SIA also called the tariffs a tax that causes companies to diverst scare semiconductor supplies to markets in other countries where they are not subject to punitive tariffs.  SIA admitted that the global impact of removing tariffs on the Chinese imports would be “an incremental step,” but added, “even incremental steps to boost U.S. supply would count for a lot.”

Members of SIA have been active proponents of funding the CHIPS Act and a tax credit for new fab investments called the FABS Act.  “Imposing steep taxes [through the tariffs] runs directly counter to the bipartisan Administration and Congressional goal of urgently expanding U.S. semiconductor manufacturing.”

On Thursday, chip CEOs and senior executives on the SIA board met with Treasury Secretary Janet Yellin to discuss CHIPS and other measures to support chip research and production in the U.S.

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