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Insight into Trump’s latest tariff announcements

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At the end of January 2025, the U.S. government revealed its intention to impose duties on imported computer chips, pharmaceuticals, and steel. This move seeks to strengthen the domestic manufacturing sector and tackle trade imbalances. Nonetheless, these actions may substantially impact international trade relations, especially concerning major U.S. partners in Asia.

Effects on the Semiconductor Sector

Impact on Semiconductor Industry

The semiconductor sector is poised to be significantly affected by these proposed tariffs. Asia dominates global chip production, accounting for over 80% of the world’s semiconductors. Leading companies such as Taiwan Semiconductor Manufacturing Co. (TSMC) and South Korea’s Samsung Electronics and SK Hynix are major suppliers to the U.S. market. For instance, TSMC, the world’s largest contract chipmaker, derives approximately 70% of its revenue from North American clients, including tech giants like Nvidia and Apple. While TSMC is investing in a $65 billion manufacturing facility in Arizona, the majority of its production remains in Taiwan, making it susceptible to the proposed tariffs. Similarly, Samsung and SK Hynix, which together control around 75% of the global DRAM market, could face challenges due to their substantial exports to the U.S.

The pharmaceutical sector is another central target of the suggested tariffs. Japanese pharmaceutical firms, such as Takeda, Astellas, Daiichi Sankyo, and Eisai, hold substantial interests in the American market. For instance, Takeda disclosed that more than half of its revenue in the previous fiscal year was from the U.S., whereas Astellas noted that 41% of its income was derived from the American market. Tariffs on imported pharmaceuticals could interfere with their operations and financial outcomes, possibly resulting in higher costs for consumers in the U.S.

Steel Industry and Wider Economic Consequences

The introduction of tariffs on steel imports aims to rejuvenate domestic steel manufacturing. Nonetheless, these measures might raise costs for sectors dependent on steel, such as the automotive and construction industries. Increased input costs could cause higher prices for consumers and possible interruptions in supply chains. Additionally, these tariffs may put pressure on relationships with major trading partners and trigger retaliatory actions, further complicating the landscape of international trade.

International Trade Ties and Possible Retaliation

The suggested tariffs have raised apprehensions among U.S. allies in Asia. Nations such as Taiwan, South Korea, and Japan, which play crucial roles in the global supply chains for semiconductors and pharmaceuticals, could face economic hurdles due to diminished competitiveness in the U.S. market. These countries might attempt to negotiate exemptions or contemplate imposing retaliatory tariffs on U.S. exports, potentially initiating a series of trade conflicts.

The proposed tariffs have elicited concerns among U.S. allies in Asia. Countries like Taiwan, South Korea, and Japan, which are integral to the global supply chains of semiconductors and pharmaceuticals, may experience economic challenges due to reduced competitiveness in the U.S. market. These nations might seek to negotiate exemptions or consider retaliatory tariffs on U.S. exports, potentially leading to a cycle of trade disputes.

Domestic Economic Considerations

While the tariffs aim to promote domestic manufacturing, they could have mixed effects on the U.S. economy. Importers are likely to pass increased costs onto consumers, leading to higher prices for goods such as electronics and medications. Additionally, industries dependent on imported components may face challenges in sourcing materials, potentially hindering production and innovation. Economists caution that such protectionist measures could disrupt supply chains and may not yield the intended benefits of job creation in the targeted industries.

By Otilia Parker

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