The US has opened national security probes into semiconductor and pharmaceutical imports, another fresh development in President Trump's trade war, that could result in tariffs on these goods.
The Department of Commerce posted notices about the probes late Monday on the Federal Register, seeking public comment within three weeks. It had not formally announced them earlier.
Although President Donald Trump paused most of his biggest tariff hikes last week for 90 days, apart from those for imports from China, he has said he still plans tariffs on pharmaceutical drugs, lumber, copper and computer chips.
The Commerce Department said it is investigating how imports of computer chips, equipment to make them, and products that contain them affect national security. Chips are found in many daily necessities such as cars, refrigerators, smart phones and other items. Under Section 232 of the Trade Expansion Act of 1962, the president is permitted to order tariffs for the sake of protecting national security.
The probe includes assessing the potential for US domestic production of computer chips to meet US demand and the role of foreign manufacturing and assembly, testing and packaging in meeting those needs.
Among other aspects of the chip supply chain, the government intends to study the risks of having production concentrated abroad. It will also look at impact of foreign government subsidies on the industry — and how this affects US competitiveness.
After Trump said electronics would not be included in what his administration calls “reciprocal” tariffs of up to 50% on some nations, US Commerce Secretary Howard Lutnick explained in an interview on ABC News that pharmaceuticals, semiconductors and autos will be handled with “sector specific” tariffs.
“And those are not available for negotiation,” Lutnick said. “They are just going to be part of making sure we reshore the core national security items that need to be made in this country. We need to make medicine in this country,” he said. “We need to make semiconductors.”
The investigation into pharmaceutical imports will look at ingredients used to make drugs and will look again at national security concerns and dependence on other nations.
Asked about his plans for more tariffs on pharmaceuticals, Trump said Monday, “Yeah, we're going to be doing that”. He said it would be in the “not too distant future”. “We’re doing it because we want to make our own drugs,” he said.
Reliance on other nations
More than 70% of the materials, or active pharmaceutical ingredients, used to make medicines made in the United States are produced in other countries, with India, the European Union and China leading suppliers. The US produces about a fifth of all pharmaceuticals made worldwide, but consumes about 45%, far more than any other country.
The US is also a major producer of semiconductors, but only in some areas. It relies heavily on imports from Taiwan and South Korea for certain kinds of advanced chips. In particular, Taiwan dominates advanced logic chip production at 92% of all fabrication capacity according to the International Trade Administration, with South Korea making 8%.
Products like laptops and smartphones — along with the components required to make them — accounted for nearly $174 billion (€153bn) in US imports from China last year. The administration's plans suggest that such electronics will still be taxed by previous (non-“reciprocal”) tariffs — and potentially under additional, sector-specific levies.
Although major computer chip makers like Taiwan Semiconductor Manufacturing Corp. are investing heavily in US manufacturing facilities, partly due to incentives put in place during former President Joe Biden's time in office, the costly process of changing entire supply chains would take years.
Separately, the Commerce Department said on Monday that it was withdrawing from a 2019 agreement that had suspended an antidumping investigation into imports of fresh tomatoes from Mexico, effective in 90 days. It said the current arrangement failed to protect US growers from “unfairly priced” imports of tomatoes. Most tomatoes from Mexico will be subject to a 20.91% tariff, it said.
