Semi stocks drop on new 10% tariff on China goods coming to U.S.

trade protectionism
President Trump tweeted plans for another 10% tariff on $300 billion in Chinese goods coming to the U.S. (iStock)

Semiconductor stocks and other broad market shares plunged Thursday after U.S. President Donald Trump tweeted that a 10% tariff will be applied starting Sept. 1 to the remaining $300 billion in goods and products coming from China to the U.S.

There was already a 25% tariff on $250 billion in goods that brought strong objections by semiconductor companies in June. The new list of goods is mostly consumer products including smartphones, TVs and laptops which obviously contain chips. Markets responded Thursday by sending the semiconductor sector down by more than 2% overall. The tech-heavy Nasdaq market closed down by .79%.

Trump made the announcement following the return of U.S. Treasury Secretary Stephen Mnuchin and other officials from trade talks in China.

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While Trump said the talks were constructive in his tweet, he imposed the added tariff over concerns that China didn’t buy agricultural products from the U.S. and did not stop selling Fentanyl to the U.S. as earlier promised.

In comments to reporters later in the day, President Trump said the tariffs could be raised higher and repeatedly said that China bears the brunt of the cost of tariffs, not U.S. consumers. He accused China of devaluing its currency, but still said trade talks will resume in September and urged Chinese negotiators to move faster in reaching a deal. However, he added, “If they don’t want to trade with us any more, that would be fine by me.”

Chip industry officials expressed concern about the ultimate impact of the new tariffs on top of the existing ones. One industry official, asking not to be identified, said, “It’s like fire coming down from the sky. For the past year, it’s been so hard to plan for the future.”

The U.S. Chamber of Commerce issued a statement that the new tariff “will only inflict greater pain on farmers, workers and consumers and undermine an otherwise strong U.S. economy.”

Some analysts worried about possible retribution from China. China could respond either by listing some U.S. companies on China’s version of an Entity list--effectively a blacklist for trade--or making good on threats to limit exports of rare earth materials used in making semiconductors and other computer components.

The Semiconductor Industry Association didn’t react to the new tariff, but referred to its public comments on June 17 objecting to the earlier 25% tariff. “We have made the case to the Administration that tariffs imposed on semiconductors and the broader IT industry will harm America’s tech companies and are an ill-equipped tool to address the problematic Chinese forced tech transfer and IP theft activities.”

U.S. Sen. Mark Warner, D-Virginia, has been concerned about theft of intellectual property by Chinese companies yet expressed grave concerns about the president’s decision.

Warner said in an email, "While I continue to share the President's concerns with China's unfair trade practices -- and most notably economic espionage, forced technology transfer, and the misappropriation of valuable intellectual property from U.S. companies -- I have grave concerns that the President's approach continues to be ad hoc and prone to wild course reversals. Trade policy -- which is a key component of U.S. foreign policy and security policy -- should not be pursued by tweet, it should be pursued through thoughtful collaboration with our allies and building international support to apply pressure on Beijing to end its unfair trade practices."

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