The Biden administration has announced a sudden trade investigation into older Chinese-made semiconductors, potentially leading to additional tariffs on chips from China used in a variety of products. The investigation, known as the “Section 301” probe, was initiated just before President-elect Donald Trump is set to take office and will be handed over to his administration for further action in January, officials revealed.
This move could provide Trump with an opportunity to impose some of the significant tariffs on Chinese imports that he has previously threatened. Outgoing President Joe Biden has already imposed a 50% tariff on Chinese semiconductors starting January 1st and has tightened export restrictions on various tech components to China. The U.S. Trade Representative’s office will lead the new probe, aimed at shielding American chip producers from China’s state-driven efforts to dominate the semiconductor industry.
U.S. Trade Representative Katherine Tai expressed concerns about Beijing’s aggressive push to control global semiconductor production, similar to its strategies in other industries. The investigation will focus on legacy chips, which are used in everyday products and do not include advanced technological chips. The public will have the opportunity to provide comments on the probe starting January 6th, with a public hearing scheduled for March 11-12.
The probe, conducted under Section 301 of the Trade Act of 1974, is a similar approach to the one Trump took in imposing tariffs on Chinese imports during his first administration. The investigation will also examine how the imported chips are integrated into downstream products for industries like defense, automotive, and medical devices.
U.S. Commerce Secretary Gina Raimondo highlighted concerns about the prevalence of Chinese legacy chips in U.S. products and the lack of knowledge about chip origins among American companies, including those in critical sectors like defense. The disruption in semiconductor supply chains due to the pandemic has underscored the importance of addressing these issues.
The United States is taking significant steps to establish its own semiconductor supply chain by allocating $52.7 billion in new subsidies for chip production, research, and workforce development. However, U.S. Commerce Secretary Gina Raimondo has expressed concerns over China’s ambitious plans to account for more than 60% of global new legacy chip capacity over the next decade. Raimondo argued that China’s aggressive efforts could deter investments in other regions and create an environment of unfair competition.
According to Raimondo, China’s strategy poses a threat to American companies and risks making the U.S. overly reliant on Chinese-made chips that are integral to numerous daily applications. She emphasized the need for the U.S. to bolster its own semiconductor industry to reduce dependency on foreign sources.
Despite the divergence in policies between the previous Trump administration and the current Biden administration, one area where continuity exists is in the imposition of tariffs on Chinese imports. President Biden has maintained all the tariffs imposed by his predecessor and even expanded them, including imposing 100% duties on Chinese-manufactured electric vehicles to protect the domestic market from foreign competition.
These measures reflect the ongoing efforts to strengthen America’s economic and technological security in the face of intense global competition, particularly from China. By investing in the semiconductor industry and maintaining trade protections, the U.S. aims to safeguard its industrial capabilities and reduce vulnerabilities stemming from reliance on foreign supplies.
The developments in semiconductor policies underscore the complex dynamics of international trade and technological competition, where governments play a crucial role in shaping the landscape for key industries. The strategic decisions made by the U.S. and other countries will have far-reaching implications for global economic relations and the future trajectory of technological innovation.
