Chip Industry Fights Next Round of China Tariffs

The Semiconductor Industry Association wants the Trump Administration to remove 39 product categories from a list of some some $16 billion worth of Chinese imports ticketed for 25 percent tariffs.

In written comments submitted Monday as part of the Administration's solicitation for public comment on the proposed tariffs, the SIA argued that imposing tariffs on semiconductors and semiconductor-related products currently slated for tariffs would undermine U.S. leadership in semiconductors, handicap  U.S.-based chip firms in relation to international competitors and threaten the market share of U.S. firms in China. The proposed tariffs would also cost U.S. exports and jobs, and raise the cost of manufactured consumer goods for U.S. consumers, the SIA argues.

What's more, the SIA argues that imposing tariffs on imports of semiconductors and semiconductor related products would result in U.S. companies paying tariffs on their own products while doing nothing to curb Chinese policies and practices deemed by the U.S. to be anticompetitive.

In the submission, the SIA says that since the majority of U.S. semiconductor imports from China are chips designed or manufactured in the U.S. that have been shipped to China for test and packaging, making import statistics for semiconductors from China a misleading metric.

The SIA, which plans to testify at a public hearing on a U.S. International Trade Commission public hearing on the proposed tariffs Tuesday, estimates that the proposed tariffs would impact about $3.6 billion in U.S. semiconductor chip imports from China and another $2.7 billion in products related to the semiconductor supply chain.

After failing to reach a deal with China to reduce a $375 billion trade deficit, the Trump Administration imposed 25% tariffs starting earlier this month on about $34 billion worth of mostly tech-related imports from China. An additional $16 billion worth of imports have been ticketed for the same tariff, set to go into effect in coming weeks. The Administration has also proposed a 10% tariff on another $200 billion worth of imports from China.

U.S. semiconductor firms and the SIA support the aims of the Trump Administration to curtail China's industrial policies and practices around intellectual property. However, the industry — as well as most economists and analysts — oppose the tariffs, which they argue will ultimately harm the global economy and penalize U.S. companies and consumers.

The SIA's submission to the USITC included the statement: "Unfortunately, misdirecting penalties at the U.S. semiconductor industry, the proposed tariffs fail to curtail Chinese discriminatory trade and unlawful IP practices or provide the United States with meaningful leverage to press China to change its behavior."

As an alternative, the SIA urges the U.S. government to "utilize more effective and targeted policies," including combatting IP theft, greater utilization of the World Trade Organization and multilateral actions with allied countries to address the "problematic aspects of Chinese industrial policy."