Although there was a sigh of relief when the US clarified that it would not be imposing tariffs on the import of smartphones and computer equipment, these tariffs are not going away.
The US wants to bring back manufacturing on-shore, and plans to do this using a semiconductor tariff, commerce secretary Howard Lutnik said in an interview on ABC News, posted on the official rapid response White House’s Twitter feed.
When asked about Trump’s decision to exclude a wide range of electronics, including smartphones and the electronic components used to make microchips, he said: “Those products are going to be part of the semiconductor sectoral tariffs, which are coming.”
Lutnik said Trump would be introducing “a special focused type of tariff” to ensure these products are manufactured in the US, adding: “We need to have semiconductors, we need to have chips, and we need to have flat panels. We need to have these things made in America. We can’t be reliant on Southeast Asia.”
While these products are currently exempt from the reciprocal tariffs that the Trump administration has imposed on other nations importing into the US, Lutnik warned that within a month or two they will be subject to sector-specific tariffs. Citing national security, he said: “We can’t be beholden and rely on foreign countries for the fundamental things that we need.”
Discussing how tariffs are affecting manufacturers of electronics goods that rely on semiconductors sourced globally, Forrester senior analyst Alvin Nguyen said: “The fluidity of the tariff situation means there will be confusion about the impact to the supply chain due to the complexity of tracking where materials and manufactured goods are produced and assembled.”
He noted that, in the medium term, semiconductor firms are likely to establish a geographic diversity strategy when making decisions on where to locate new foundries for manufacturing and the supporting supply chains.
According to Nguyen, such a strategy would be beneficial as it reduces the dependence on Taiwan for the majority of chip production. “For datacentres, this may cause some changes to datacentre investments depending on the state of tariffs and the cost impacts by location,” he added.
Nguyen notes that among the scenarios that may play out is that business leaders could change where and when they build datacentres based on sovereignty laws for AI and data, with datacentre builds based on when and where it makes economic sense.
This is a very different approach to datacentre capacity planning, which has traditionally been based on forecasting the computing, storage and networking capacity required to support business growth.
National interests
While policymakers in the EU and the UK have been on a path to encourage sovereign AI and cloud datacentre facilities, their existing plans recognise the huge upfront costs involved in developing chip manufacturing without relying on other countries. The EU Chip Act provides €43bn in semiconductor investment until 2030.
The future of European competitiveness: A competitiveness strategy for Europe 2024 report by Mario Draghi recommends that for strategic industries, the EU should pursue a coordinated EU strategy to bolster domestic production capacity and to protect key network infrastructures. Draghi said Europe should maximise its joint efforts to strengthen innovation in semiconductors and its presence in advanced chips segments.
Intel is among the US chipmakers building out geo-diverse manufacturing, with a number of fabs in Europe.
In October 2024, a policy document from the Digital Future of Work research centre noted that the EU made substantial investments to build end-to-end domestic capabilities across the entire semiconductor supply chain. However, the document’s authors said that compared with the amount the EU has invested, the UK’s semiconductor strategy devotes a modest £1bn over the next decade focused on intellectual property and compound semiconductors.
Compound semiconductors represent a growth opportunity for the UK, but this technology is very different to the semiconductors needed for the vast amounts of processing power and memory used in modern datacentre servers. They do, however, play a key role in the power supply units for these servers.
The changes in US trade policy may scupper the UK’s semiconductor strategy, which relies on working with international partners. Without massive investment or incentives to get major chip manufacturers to build UK-based foundries, the country is prone to supply chain risks and exposed to the forthcoming US semiconductor tariffs.
