The United States is on the brink of a seismic shift in semiconductor trade policies as President Donald Trump gears up to launch an investigation that could result in imposing tariffs on semiconductor technology. This move, aimed at safeguarding national security, has the potential to ignite a trade war with major economies in East Asia, especially Taiwan, a significant chip supplier to the U.S.
The investigation, to be initiated under Section 232 of the Trade Expansion Act of 1962, grants the president authority to curb imports that pose a national security threat. President Trump has hinted at imposing tariffs starting at 25 percent on semiconductors, with the possibility of raising them significantly within a year. This aggressive tariff strategy follows recent investigations into the copper and timber industries and the expansion of steel and aluminum tariffs.
If implemented, these new duties on semiconductors would add to the barrage of tariffs imposed by the Trump administration, including a substantial 145 percent tariff on Chinese imports. The tech sector, heavily reliant on chip imports, is on edge, awaiting the outcome of this high-stakes investigation. Countries like South Korea, Malaysia, Japan, and China, the largest consumer of semiconductors globally, are deeply enmeshed in the semiconductor supply chain.
Despite criticisms from lawmakers like Senator Elizabeth Warren, who denounced the lack of a coherent tariff strategy, the White House remains steadfast in its pursuit of protecting domestic industries. As the U.S. braces for a potential trade showdown, the ramifications of this decision could reshape global trade dynamics and have a profound impact on the technology landscape.
In the wake of Donald Trump’s hot-and-cold trade war, Europe has attempted to get closer to China. Spanish Prime Minister Pedro Sánchez this week flew out to meet Xi Jinping in Beijing, while a visit by European Union leaders is on the cards for July. Last year, Europeans were still in defensive mode, slapping their own tariffs on Chinese vehicle imports — but now these could be negotiated away.
With transatlantic relations strained to breaking point, drawing closer to America’s greatest rival might therefore seem in order. While the move is understandable, the question remains as to whether it is smart. Oren Cass argued for the Financial Times that the new American worldview is not motivated by delusions of grandeur — in fact, quite the opposite. The unipolar world order was always a temporary phenomenon, and now it’s over.
The U.S. will have its sphere of influence, but other great powers — especially China — will have theirs, too. That’s why the European attempt to flirt with Xi to make Trump jealous won’t work. The new America isn’t looking for flattery: it’s asking its allies to pick a side. That’s not a real choice, of course.
Besides political or military considerations, American companies have roughly $4 trillion invested in Europe, while the figure for European organizations in the U.S. is $3.4 trillion. These sums dwarf the continent’s limited stakes in China; so when America says it wants a new relationship based on balanced trade, higher defense spending, and a common front against Chinese influence, Europe needs to listen.
Far from turning away from Trump, the EU should be taking the initiative in building a new transatlantic relationship. Firstly, leaders should be cracking down on trade-distorting practices by EU member states. For instance, Brad Setser of the Council on Foreign Relations points out that the $84 billion deficit that the U.S. has run with Ireland in pharmaceuticals accounts for about one-third of the total U.S. bilateral trade deficit with the EU.
Most of this surplus is the result of transfer pricing games enabled by Irish tax policies. Eliminating tax havens across the EU wouldn’t just strengthen the Single Market: it would cut the size of the trade imbalance with America. Secondly, the EU should dissuade France from linking a much-needed defense deal with the United Kingdom to access to British fisheries.
Kaja Kallas, the EU’s High Representative for Foreign Affairs and Security Policy, has hinted at her frustration with this short-sighted selfishness, but other leaders need to join in. How will the EU ever be able to make timely decisions if each initiative becomes bogged down in opportunistic and irrelevant horse-trading?
Another important step would be to end Europe’s regulatory war against Silicon Valley. If the EU had an impressive tech sector of its own, then a degree of protectionism might make sense — but, with very few exceptions, it doesn’t. A reported rethink of the EU’s burdensome GDPR legislation would make excellent kindling for a much bigger bonfire of anti-tech red tape.
In its place, Europe should cooperate with America to create a shared and secure market for internet infrastructure, artificial intelligence, driverless vehicles, and other future-shaping technologies. For all his faults, Donald Trump understands that the world is changing. Europe, however, still lacks leaders with the maturity to do the same.
