Last week, the Office of the United States Trade Representative issued a notice on December 23 stating the country would delay tariffs on Chinese chips until mid-2027, despite condemning Beijing's attempts to dominate semiconductor production as unreasonable and burdensome to American business
The notice stated that tariffs would remain at zero for 18 months, with an unspecified tariff increase set for June 2027.
This decision likely reflects an unspoken truce between Beijing and Washington, following Xi and Trump's meeting in Korea in October. While using forceful rhetoric on the surface, the main purpose of the announcement is actually to mitigate the short term impact on trade between the U.S. and China whileundermining Beijing's semiconductor industry over the long-term by encouraging U.S. companies to reduce purchases of Chinese chips.
U.S. efforts to restrict or cut off China's access toadvanced chip production equipment have so far succeeded in constraining Beijing's manufacturing capabilities, despite progress by domestic giants such as Huawei and SMIC.
Around three-fourths of chips on the market are made by mature processes, with the rest being cutting-edge. Due to their cost-effectiveness and demand, mature process chips are used broadly across automotive electronics, smart appliances, sensors, industrial controls, medical equipment, and consumer electronics.
However, despite U.S. restrictions, China continues to increase its production of mature-process chips, already producing over a third of the global total, with some predicting it could reach over half by 2030.
From Washington's perspective, this is unfavorable. While immediately imposing high tariffs could reduce imports of Chinese chips, they could disrupt chip supplies to key industries and lead to shutdowns, particularly in the automotive sector.
A recent example of this happening occurred in September,when the Netherlands seized control of Nexperia - a semiconductor company partially owned by the Chinese government - due to U.S. sanctions and security concerns.
China retaliated by blocking exports of Nexperia's China-produced chips, nearly disrupting European auto manufacturers' supply chains until a temporary truce was reached following thesummit between Trump and Xi.
Given that automotive chip certification can take up to several years, Washington's 18-month advance notice is meant as a strategic warning period intended to give manufacturers time to find alternative suppliers （Related： Taiwanese Executive Premier Calls Legislature to Support Retirement Benefits and Military Pay ｜ Latest ）
The effects of this policy remain to be seen. Many details, such as the exact tariff rates andhow to handle products containing Chinese chips, remain undecided. U.S. companies using Chinese chips will experience varying levels of impact depending on the cost share of the chips. Furthermore, Chinese-made chips might remain competitive in terms of costs and technology despite high tariffs, limiting the impact of the policy.
