Trump says that chip tariffs are starting 'very soon'

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How high will the tariffs be?

Alder Lake
(Image credit: Intel)

For now, the sweeping import tariffs enacted by the U.S. government do not tax imports of semiconductors. Still, the Trump administration is preparing separate tariffs for sectors like semiconductors, pharmaceuticals, and possibly critical minerals. Apparently, Trump expects to impose tariffs on chips 'very soon.'

"The chips [tariffs] are starting very soon and the pharma is going to be starting to come in […] sometime in the near future," said President Trump at a White House briefing.

Earlier this year, Trump threatened to impose 25%, 50%, or 100% tariffs on semiconductors produced in Taiwan but remained quiet after TSMC committed to investing an additional $100 billion in its production capacity and an R&D center in the U.S.

However, after the sweeping tariffs imposed on goods from Europe, Japan, South Korea, and Taiwan made chipmaking tools 20%—32% more expensive for American chip producers and, therefore, increased their costs, it is logical for the U.S. government to impose tariffs on foreign semiconductors to somewhat level their competitive advantages over domestic chips in the American market.

It remains to be seen how the Trump administration's chip tariffs will look and whether there will be sweeping tariffs on all chip exports or some kind of differentiation.

Sweeping tariffs on all chips produced outside of the U.S. will hurt the best and most profitable American chipmakers, such as AMD, Broadcom, Intel, Nvidia, and Qualcomm, which make the lion's share of their products at TSMC in Taiwan.

For example, if there is a 25% tariff on an Nvidia AI GPU that the company sells for $50,000 with a 75% gross margin, then Nvidia will have to declare a value of $12,500 and pay an import duty of $3,125. Such a tariff will either hurt Nvidia's margins or make its GPUs more expensive for buyers in America. For Elon Musk's next-generation data centers, which are set to contain a million GPUs, this means $3.125 billion of additional costs.

Of course, there are cheaper products sold at a lower margin. For example, a $200 CPU is sold with a 40% - 50% gross margin across the supply chain. So, a 25% tariff will increase the retail price of such a CPU to $225 — a significant increase — if not absorbed by the CPU producer and the supply chain.

With the current sweeping 'reciprocal' tariffs set on exports from all the U.S. trade partners, the U.S. government used a straightforward method for setting the tariff: they divided the U.S. trade deficit with each country by the total value of imports from that country, according to numerous analysts (there is a graph proving this here). Hopefully, the Trump administration will use a more sophisticated method of calculating semiconductor import taxes.

Anton Shilov
Anton Shilov
Contributing Writer

Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

10 Comments Comment from the forums
  • ohio_buckeye
    Glad I got my build done late last year.
    Reply
  • thestryker
    This puts Intel in an interesting position margins wise because their enterprise parts are made and packaged in the US, and PTL will be mostly the same. They're the only big technology company I can see getting any sort of benefit from this tariff strategy.
    Reply
  • araczynski
    Not sure most uprocessor manufacturers would care, they're pretty specialized/isolated and can just easily pass the cost on to the consumers.

    Guessing Intel/AMD are not too worried about anything from anyone else undercutting their business, nor NVIDIA/AMD, not pretty much most other manufacturers...

    Mod Edit - Political Comment
    Reply
  • bit_user
    araczynski said:
    Not sure most uprocessor manufacturers would care, they're pretty specialized/isolated and can just easily pass the cost on to the consumers.
    Higher prices lead to reduced profitability by two means. First, people who don't really need to buy a new CPU are less likely to do so, leading to reduced sales volume. Second, individuals and companies facing budgetary constraints might buy lower-cost models, leading to less profit per unit sold.

    Finally, any products made for export that include components subject to tariffs will cost more than those made in countries without such added costs, leading to reduced exports. This paradoxically hurts the trade deficit, especially for value-added products, like manufactured goods.

    araczynski said:
    Guessing Intel/AMD are not too worried about anything from anyone else undercutting their business, nor NVIDIA/AMD, not pretty much most other manufacturers...
    It will be interesting to see what happens to international sales, in those markets where they do face competition, such as Chromebooks.
    Reply
  • Hotrod2go
    ohio_buckeye said:
    Glad I got my build done late last year.
    Yes indeed, glad I did the same on 3 systems I have here. Won't need upgrades for a good while yet, probably in 2026 or later depending on my usage scenario.
    Reply
  • gc9
    Smuggling will increase. Are smuggled items (that cross the border without paying any tariff) subject to confiscation at any time after they are received, just like stolen items? How can buyers verify/prove that an imported item has had its tariffs paid? Do tariffed imported products come with a receipt that the consumer receives, not just the shipper who paid the tariff? Or are there websites of government data that can be queried? Or blockchain shipping/supply chain audit trails that can be read?
    Reply
  • thestryker
    gc9 said:
    Smuggling will increase. Are smuggled items (that cross the border without paying any tariff) subject to confiscation at any time after they are received, just like stolen items? How can buyers verify/prove that an imported item has had its tariffs paid? Do tariffed imported products come with a receipt that the consumer receives, not just the shipper who paid the tariff? Or are there websites of government data that can be queried? Or blockchain shipping/supply chain audit trails that can be read?
    Tariffs are paid at time of entry and that's the only time it applies. They're about trade and not really about the individual level. The likelihood of any sort of smuggling at scale is pretty low.

    An interesting anomaly which could be similar here is that there has been a huge increase in poultry products seized at the borders due to egg prices. I wouldn't be surprised if we saw random goods seizures increasing.
    Reply
  • bit_user
    thestryker said:
    An interesting anomaly which could be similar here is that there has been a huge increase in poultry products seized at the borders due to egg prices. I wouldn't be surprised if we saw random goods seizures increasing.
    Suddenly, I'm reminded of those news articles we used to see where someone would be trying to smuggle like 500 CPUs across the Chinese border, inside a scooter or something.
    https://www.tomshardware.com/news/microsd-cards-smuggled-china-cyclist https://www.tomshardware.com/pc-components/truck-with-usd1-8m-in-smuggled-electronics-seized-by-hong-kong-customs-670-000-undeclared-chips-670-000-chips-and-about-80-000-pc-hardware-components https://www.tomshardware.com/news/780-cpus-seized-in-smuggling-bust https://www.tomshardware.com/news/smuggler-caught-with-420-m2-ssds-strapped-to-his-stomach https://www.tomshardware.com/news/chinese-officials-discover-cache-of-360-intel-cpus-hidden-in-possibly-front-side-of-bus https://www.tomshardware.com/phones/passenger-caught-using-electric-wheelchair-to-smuggle-more-than-100-mobile-phones-into-china
    Reply
  • bit_user
    baboma said:
    >Smuggling will increase.

    No, it won't.

    There are many reasons for this. Here's the main one: smuggling is only feasible when there's a scarcity imbalance, not a pricing imbalance.
    In the post above yours, I cited half a dozen (out of many more) counterexamples.

    baboma said:
    IOW, smuggling only works when there's a ban or a sanction on an item, not a tariff.
    Another common example is cigarettes. The US Federal government has quite a high tobacco tax, which doesn't apply to cigarettes sold on Native American lands.

    baboma said:
    The reason is simple: peace of mind. Most people would pay a higher price for a legit item, vs a gray/black market item with no warranty, and with a high possibility of being fake.
    Sites like AliExpress and Temu sell $Billions of merchandise into the US, annually. Clearly, plenty of people are willing to roll the dice on that.
    Reply
  • bit_user
    baboma said:
    Smuggling within one country's border is obviously easier than between countries.
    I'm no expert on the subject, but I believe there are numerous uncontrolled border crossings between the US and Canada. For those living near the Canadian border, it wouldn't be much harder than a trip to a neighboring US state.

    baboma said:
    Even so, the outlines of the generalization applies: price of legit cigs have not been affected because of smuggled cigs.
    It didn't affect prices because the tax is higher than the base price of the product. So, there's no possible way legal cigarettes could be discounted to approximate the price of smuggled ones.

    baboma said:
    Cigs don't need warranties, and it's not cost-effective to make fake cigs.
    Well, there's a different sort of risk posed by counterfeit tobacco products, which is that they might be even more harmful to users. There was a big health scare with counterfeit vapes, like 6 years ago, where someone used the wrong kind of vitamin E additive and it landed several users in the hospital.

    I don't know about the size of the counterfeit cigarette market, but I certainly wouldn't assume it's nonexistent.

    baboma said:
    >Sites like AliExpress and Temu sell $Billions of merchandise into the US, annually. Clearly, plenty of people are willing to roll the dice on that.

    One, buying from offshore sites is not smuggling. **
    By this point, you had switched to talking about grey market and the risk of counterfeit products. That's what those examples were meant to rebut.

    baboma said:
    Three, the Shein/Temu/Ali route is no longer viable for cheap goods, now that the de minimis exemption is dead.
    Doesn't nullify my point that people were willing to roll those dice when there was an upside to doing so.

    baboma said:
    ** This issue will rear its head once the pharma tariff kicks in. There are offshore pharmacies selling cheaper alternatives right now, yes, because of price imbalance. But again, a gray market is not smuggling.
    If not smuggling, what do you call it when people take day-trips from the USA to Canada, in order to fill their prescriptions?
    Reply