For all of his tough anti-China talk, President Donald Trump sure is doing the Chinese communist party a favor. Not only is he antagonizing all of China’s allies and starting trade wars across the globe, but he is now targeting Taiwan.
Trump’s threat to impose 25-100% tariffs on Taiwanese semiconductors and pharmaceuticals could break the U.S. economy.
Taiwan manufactures the vast majority of the world’s microchips—90% of the highest powered chips and 68% of all chips—powering everything from Apple and Android phones to cars, appliances, televisions, computers, gaming consoles, toys, fighter jets, military gear, and pretty much anything with a screen.
Trump, for whatever reason, has decided that it’s a problem that the world’s most valuable companies—most of which are U.S. tech giants like Nvidia, Amazon, Apple, Alphabet (Google), Microsoft, Tesla, and Meta—don’t make their chips in-house.
“In the very near future, we’re going to be placing tariffs on foreign production of computer chips, semiconductors and pharmaceuticals to return production of these essential goods to the United States. They left us and went to Taiwan,” Trump told the House Republican Issues Conference on Monday.
Furthermore, he froze billions of dollars allocated to help companies like Intel and TSMC do exactly that—build chip foundries in the United States.
“We don’t have to give them money. They’re going to come in because it’s good for them to come in,” he claimed.
The incentive for manufacturers, instead, will be that “they will not want to pay a tax.” Manufacturers might initially pay the tax, but that cost will be passed on to consumers.
It’s a tax on all of us.
Taiwan chip manufacturer TSMC is spending a mind-boggling $65 billion on a chip factory in Arizona, with former President Joe Biden’s U.S. CHIPS Act contributing an additional $6.6 billion. That alone informs the massive expense of building plants in the United States—and how the government can expedite such work.
And even fully funded, it takes around 6-8 years to build and staff these foundries. Trump likely thinks new plants can be up and running by summer.
Intel is spending even more money on foundries in Arizona, Ohio, New Mexico, and Oregon, investing more than $100 billion, supplemented by a little under $8 billion in CHIPS Act money. If it must trim its sails, Intel would nix the Ohio factory and teach Vice President JD Vance and his supporters a lesson. But Trump won’t care.
The Consumer Technology Association reports that a 10-20% tariff on all imports and a 60% tariff on China would “increase prices on laptops and tablets by 46%, video game consoles by 40%, and smartphones by 26%.”
If Trump’s 25-100% tariff comes to pass, it would make those items even more expensive, which would hamper U.S. AI efforts. And while some might think that’s a good thing, it’s actually quite a bit more complicated than that.
Ironically, this completely steps on the $500 billion Project Stargate that Trump so happily announced last week, making the chips that would power those data centers twice as expensive. It would also make manufacturing and farming equipment more expensive, which would essentially impact all segments of the U.S. economy.
And that’s before we even get to the retaliatory tariffs, which weirdly don’t exist in Trump’s mind.
In 2022, the United States exported $44 billion in goods to Taiwan, including “Machinery and Mechanical Appliances (37.5% of the total exports to the country), Oils, Minerals, Lime, and Cement (18.0% of such total), and Chemicals, Plastics, Rubber, and Leather Goods (11.9% of such total).”
Another 10% is agricultural imports.
I’m sure that Trump’s friends in Big Oil, agriculture, and construction will be happy to lose access to the Taiwanese market, you know, because Trump is so “pro-business.”
There are also down-wind effects. China’s belligerence over the past decade and the coronavirus pandemic have led many companies, like Apple, to diversify or retreat from manufacturing in that country, and it has been U.S. policy to encourage that trend—to mixed results.
There are always broader consequences to bullying, and this is no different.
If a company is dependent on U.S. goods, and the United States uses that dependence for noxious leverage, it incentivizes countries to look elsewhere. We’ve seen that in Europe, where countries were already looking for alternatives to U.S. arms suppliers given Trump’s hostility during his first term.
“We cannot leave the security of Europe in the hands of voters in Wisconsin every 4 years,” French President Emmanuel Macron said last October, right before the election.
The same goes for economic security.
All of this has dire consequences for the U.S. economy without even getting into the geopolitical hornet’s nest of Trump creation, making a Chinese invasion of Taiwan more likely within the next four years—a war that would likely pull in the United States no matter how much Trump might wish otherwise.
There are few things more important to the U.S. economy and national security than microchips, and the vast majority are currently sourced from Taiwan. Cutting off that supply without any alternate sources is nothing short of disaster for the United States.
But at least we can console ourselves by watching Trump’s billionaire tech broligarchs cry about it. And, who knows, maybe some Trump voters will finally see the light.
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