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
The semiconductor industry is set to be notably impacted by these planned tariffs. Asia leads in worldwide chip production, producing over 80% of the planet’s semiconductors. Prominent firms such as Taiwan Semiconductor Manufacturing Co. (TSMC) and South Korea’s Samsung Electronics along with SK Hynix are key suppliers to the American market. For example, TSMC, recognized as the largest contract chip manufacturer internationally, earns about 70% of its revenue from North American customers, including tech powerhouses like Nvidia and Apple. Although TSMC is investing in a $65 billion production facility in Arizona, most of its output still occurs in Taiwan, which exposes it to the proposed tariffs. In a similar vein, Samsung and SK Hynix, which together hold around 75% of the global DRAM market, might encounter obstacles due to their significant exports to the United States.
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.
The pharmaceutical industry is another focal point of the proposed tariffs. Japanese pharmaceutical companies, including Takeda, Astellas, Daiichi Sankyo, and Eisai, have significant stakes in the U.S. market. For example, Takeda reported that over half of its revenue in the last financial year originated from the U.S., while Astellas indicated that 41% of its revenue came from the U.S. market. Tariffs on imported pharmaceuticals could disrupt their operations and financial performance, potentially leading to increased costs for U.S. consumers.
Applying tariffs on steel imports aims to boost local steel manufacturing. Nevertheless, these actions may cause higher expenses for industries dependent on steel, like the automotive and construction sectors. Increased input costs could lead to higher prices for consumers and possible disruptions in supply chains. Additionally, these tariffs might strain relationships with principal trading partners and trigger retaliatory actions, further complicating global trade relations.
The imposition of tariffs on steel imports is intended to revitalize domestic steel production. However, such measures may lead to increased costs for industries reliant on steel, including automotive and construction sectors. Higher input costs could result in elevated prices for consumers and potential disruptions in supply chains. Moreover, these tariffs might strain relationships with key trading partners and provoke retaliatory measures, further complicating international trade dynamics.
Global Trade Relations and Potential Retaliation
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.