I applaud President Donald J. Trump for pushing hard to reshore manufacturing, yet I am worried that a new contemplated expansion of tariffs on semiconductors would do great economic harm to the American economy. A high tariff on imported semiconductors will hike costs and limit access to all the American interests reliant computing, smart phones and data storage. It is good policy to promote a vibrant domestic semiconductor manufacturing capacity, but new tariffs will not miraculously create that manufacturing capacity overnight.
The Trump Administration is considering using Sec. 232 of the Trade Expansion Act to hit semiconductors with a broad tariff on all imports. Semiconductors are the building block of all the technology we use today. When we talk about “chips” and the need for them to power computers and electronic devices, semiconductors are a building blocks for chips used in computing. Semiconductors account for about $800 billion in revenue worldwide and facilitate about $7 trillion in global commerce. A trade policy touching on this industry should be very careful not to sabotage American access to these important tech inputs.
I am no fan of tariffs, yet they are a fact of American life. When looking at the different tariffs imposed, one can see that some cause less disruption than others. Tariffs on groceries make little sense because there are imports like olive oil, avocados and bananas that are largely grown abroad. Tariffs targeted to encourage domestic manufacturing of goods that are deemed a national security necessity make more sense. When using Sec. 232, there needs to be a finding of a national security interest justifying the imposition of a tariff. The irony is that a punishing tariff on semiconductors may actually hurt national security.
Making it more costly and difficult to secure semiconductors likely impacts national security for several reasons, because a strong and reliable supply chain is critical for national security. Our defense infrastructure is reliant on semiconductors at every level. First, missile defense systems and military communications networks all rely on semiconductors to work. Any trade policy that impacts readiness and procurement impact these systems and all defense infrastructure reliant on computing. Also, any disruption caused by increased prices in the semiconductor supply chain will hike costs and slow down the use of them by the military. Furthermore, domestic manufacturing of semiconductors is capable today to supply a United States currently at war. , Our nation needs to maintain a technology superiority over our adversaries. High tariffs while waiting for a domestic semiconductor manufacturing capability to stand up ignores the national security impact of those tariffs.
The economic consequences of a high tariff on semiconductors are immense. The Information Technology & Innovation Center (IFIF) put out a report in June of 2026 concluding that a 25% semiconductor tariff over 10 years would decrease U.S. GDP by $1.6 trillion. They also found that a 50% tariff would decrease U.S. GDP by about 2% hammering the economy with $4.4 trillion in lost GDP output. Those numbers alone speak to the idea that a broad-based tariff on semiconductors impacts long term economic growth.
One goal for using trade policy to reshore economic activity is to restore American competitiveness versus China. These proposed tariffs may do the opposite. Any policy promoting competitiveness should strengthen companies who are leading innovation in America. It will be impossible for the U.S. to lead in AI and tech if tariff policy limits to access to semiconductors. A smart trade policy would preserve competitiveness when imposing new tariff regimes. When it comes to the technology sector, high input costs could put American companies at a disadvantage when competing with Chinese companies.
The baseline problem of high tariffs is that semiconductors are used by American companies as an input to manufacture goods. Semiconductors are the connective tissue for our modern technology-based economy. They are critical for consumer use in smartphones and computers while domestic manufacturers need them for industrial machinery and vehicles. Factor in that they are critical to support AI and other sectors of the economy that rely heavily on computing and data storage. Finally, they are used to protect America as part of our defense infrastructure.
All of those uses speak to the idea that a high tariff on imported semiconductors would be bad policy and bad politics as the evidence mounts that the tariffs hurt economic output and puts limits on the use of them for some government functions. Tariffs sometimes have unintended consequences, and the downside of new high semiconductor tariffs will end up hurting the very industries and consumers that it is intended to help.
