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Since July 2018, the U.S. has been imposing tariffs on goods imported from China based on Section 301 of the Trade Act of 1974. These Section 301 tariffs were imposed after the United States Trade Representative (USTR) conducted an investigation and determined that China’s acts, policies and practices regarding technology transfer, intellectual property and innovation were unreasonable and discriminatory and burdened or restricted U.S. commerce, according to The National Law Review.
The tariffs impact roughly $550 billion of goods that are imported from China every year. Specific taxes on certain imported goods, the tariffs affect a wide range of goods that includes everything from engines and farming equipment to dairy products and raw materials like silicone and petroleum.
Taking a Stand
In December, the Semiconductor Industry Association (SIA) submitted comments to the USTR, urging it to eliminate the semiconductor tariffs. “Section 301 tariffs on semiconductors and associated products are contributing to the current global chip shortage,” SIA explained in its comments, “leading to higher prices, and worsening damage to U.S. consumers and manufacturers of autos, appliances, medical equipment, and other U.S. industrial and technology products.”
SIA says the tariffs on semiconductors and associated products are, in effect, a damaging tax on U.S. chipmakers and consumers, and that they create unnecessary burdens on the national economy. In addition, it says the tariffs undermine the semiconductor industry’s efforts to continue ramping up production capacity to meet soaring demand for semiconductors.
“We believe the [Biden] Administration can eliminate tariffs on semiconductors and associated products in a surgical way,” SIA points out, “without limiting its leverage to continue negotiating more favorable trade and economic terms with China.”
The Bedrock of the Modern Economy
Calling semiconductors the “bedrock of the modern economy,” SIA says chips power everything digital—from smartphones and cars to supercomputers and medical equipment. U.S. chip companies lead the world with close to half of global market share, it adds, and semiconductor exports eclipsed $49 billion in 2020, making chips a top-five U.S. export.
“The semiconductor industry also maintains a consistent trade surplus with China,” SIA states. “Nearly half of the manufacturing operations of U.S. semiconductor producers are located domestically across 18 states. The semiconductor industry employs 277,000 U.S. workers in high-paying jobs and supports an additional 1.6 million jobs throughout the U.S. economy.”
Foundational Components
Semiconductors are also a foundational component for many medical devices, including the ventilators used to battle the ongoing COVID-19 pandemic. “Lifting the Section 301 tariffs on semiconductors and associated products,” SIA reasons, “would help promote access to and affordability of healthcare products and services during this time of strained resources.”
SIA says the current tariffs are also “disproportionately harming” the national semiconductor industry and broader U.S. interests while also “failing to put real pressure on the Chinese government” to alter any unfair trade practices that exist.
“The U.S. semiconductor industry maintains a consistent trade surplus with China,” the group points out. “In fact, most of the chips imported from China were processed at assembly, test, and packaging plants owned and operated by U.S. semiconductor companies there.”
