It is no surprise/expected and would be interesting to see the actions from intel, Micron, tsmc, Samsung, SK hynix and booming Chinese foundry companies upon this change.
Trump says that chip tariffs are starting 'very soon'
How high will the tariffs be?www.tomshardware.com
In the news today - Intel/TSMC JV
- Thread starter ashwinbrao1
- Start date
Personally, I think broader tax doesn't make much sense. The tax should not target average person. But component tax on semi conductor would make sense as that will expedite relocation of high value manufacturing supply chain. It will also be a political win.
Admittedly I do not know much about tariffs so can someone explain to me why a bunch of countries have tariffs against US products in the first place? And, more importantly, why is the US just now responding to them? I really hate to see the semiconductor industry get caught up in this but seriously, why does the US have a trillion dollar trade deficit?
This is probably more believable deal to me. TSM already did a deal with AMKOR for advanced packaging iirc. May be they are unloading some stuff to Intel Foundry to help with capacity constraints or to bypass tariff. This collaboration is probably what the news media is (mis)reporting as a JV.
To do packaging in the US actually increases the trade deficit between US and TW.
Making wafer in Arizona and packaging in Taiwan means TW buys a lot of wafers from the US. As long as the next stop (EMS or assembly lines) isn’t US or TW. This reduces US deficit with TW and thus the tarrif.
Anyway, to do packaging in the US is a political decision not a economic one.
I agree it is political, but it is also what customers want. TSMC would not be in AZ without customer demand/support. Customers know that AZ based wafers will cost more and I'm sure packaging is the same. For better or worse semiconductor manufacturing is coming back to the US, absolutely.
This is the average tariffs for each country: https://www.visualcapitalist.com/tariff-rates-by-country/
Because Americans a big consumers. It's nothing to do with tariffs
It is not correct. It is difficult to find expert analysis without a paywall, but I think the BBC does a fairly reasonable job.
How were Donald Trump's tariffs calculated?
Analysts have questioned claims that new tariffs are reciprocal and based on those charged against the US.
www.bbc.com
I agree that our reduced manufacturing infrastructure is a fundamental threat to national security, but the way Trump is going about remedies with tariffs, because that's the only autocratic tool he has, is just plain bad policy.
It is not correct. It is difficult to find expert analysis without a paywall, but I think the BBC does a fairly reasonable job.
How were Donald Trump's tariffs calculated?
Analysts have questioned claims that new tariffs are reciprocal and based on those charged against the US.
I agree that our reduced manufacturing infrastructure is a fundamental threat to national security, but the way Trump is going about remedies with tariffs, because that's the only autocratic tool he has, is just plain bad policy.
Okay, I understand the math now. Very misleading but I get where this is going. It really is a game of chicken or hawk-dove in gaming theory. Let's call it math for politicians.
Reciprocal is definitely misleading / incorrect but there are also some other things countries do to effectively prevent free two-way trade besides tariffs. Someone else on here posted a good list but think of things like banning imports of certain products in general or subsidy incentives for local production.
I personally believe in free trade (to avoid wars) but a tariff is only one way to favor exports vs imports and cause an imbalance.
Trump is trying to use a single method (tariffs) rather than a bunch of complicated legislation to balance it out. Yes "politician math" but in the end it's all trade dollars. Fwiw he complains about the trade imbalances in his 1987 book "The Art of the Deal".
I personally believe in free trade (to avoid wars) but a tariff is only one way to favor exports vs imports and cause an imbalance.
Trump is trying to use a single method (tariffs) rather than a bunch of complicated legislation to balance it out. Yes "politician math" but in the end it's all trade dollars. Fwiw he complains about the trade imbalances in his 1987 book "The Art of the Deal".
There’s also the real question of what he’s trying to do:
* Zero out trade imbalances county-by-country, through a bunch of serial negotiations, with each country ? And does that mean favoring some product areas where the US is a production leader or some strategic focus on sectors where we want to remain strong ? Or will he attempt to flatten things out sector-by-sector ?
* Maintain tariffs to build US manufacturing over the long haul ? That has two problems: it’s incompatible with the first bullet - if the tariffs used for county-by-county negotiation, why would a company build new capacity if the tariffs will eventually be negotiated away ? Plus it becomes hard to operate in a world where tariffs are only partially in place - products can easily be trans-shipped or be manufactured by a company HQed in a tariffed nation from a non-tariffed locale (the Vietnam/China problem).
* Maximize tariff income so he can reduce taxes, as he often states. That would mean picking sectors for tariffs where the US is unlikely to produce locally, buys a lot, and more heavily tariffing those products.
All of those are somewhat mutually exclusive. Yet Trump claims he’s going to potentially do all three.
Trump Has Already Botched His Own Bad Tariff Plan — The Atlantic
Once you’ve said you might negotiate, nobody is going to believe you when you change your mind and say you’ll never negotiate.
apple.news
Dan,
I'll try to be concise but it's a long history and all goes back to 1944 and 1971.
1944 - Towards the end of WWII, there was a conference among nations called "Bretton Woods conference." It was decided in the conference that the world would move on from the British Pound-Sterling to the US Dollar as the Reserve Currency as by that time, the British empire was decimated from the 2 world wars and Britain was drowning in debt. US was already the largest manufacturer and the economy in the world by then. Given that all nations devalued their currencies during the 2 great wars, it was decided in the conference that all nations would use US$ as the Reserve Currency which in turn would be convertible to Gold so that US can not unilaterally print and devalue the US$. US Gold reserve at the time was ~25000 tons (basically the entire world economy was gone from the 2 wars; only US was left standing and therefore everybody exchanged their Gold for US goods).
For foreigners to use US$ as the Reserve Currency, they have to get US$, therefore they must export to the US to earn US$. US starts outsourcing industries to Europe (under Marshall plan), Japan and other places.
1944 - 1971 - US gets involved in Korean war, Vietnam war, Space exploration, Medicare expansion - all extremely expensive endeavors done without raising taxes and by running huge budget deficits; other nations, led by France, start questioning the US$ convertibility to Gold and starts repatriating their Gold. US Gold reserve falls from ~25000 tons in 1944 to ~9000 tons in 1971.
1971 - Nixon, on a Sunday night TV address, "temporarily" closes the Gold Convertibility window - never to reopen again. Now US$ is backed only by faith in the Government. Since all other nations tied their currencies to the US$, the entire world economy moves on from "Gold standard" to "Fiat standard".
Since Nixon knew that moving on from the Gold standard would unleash inflation by virtue of fiscal discipline being gone (can't print Gold but can print unlimited Fiat), one way to partly solve the issue was to normalize ties with China and bring its 1.5 billion "workers" into the picture (1974 - Nixon goes to China). US starts outsourcing in earnest - Consumer inflation does not rise as much as expected as more Fiat is balanced by more Labor supply from China and other developing Asian nations. US labor gets decimated - their "inflation-adjusted" income has not risen for the last 50 years. Since US "income" is now falling, Government has to run deficits as income taxes don't keep up with Fiscal spending. Government issues bonds which are in turn bought by countries running trade surplus with the US (e.g. China, Japan etc) - this is critical and completes the Fiat loop --> US runs trade deficit --> US$ goes to foreigners who use it as the Reserve Currency and accumulate their national savings in US$, US Government bonds and US assets (US assets like Stocks did extremely well in the last 50 years but US labor did not) --> Government and people in the US go deeper into debt (Federal Reserve drives down interest rates, facilitating more borrowing) to finance the trade deficit --> the loop goes on. This loop works as long as foreigners recycle their US$ into financing the US government by buying the US government debt and by buying US assets like the S&P and NASDAQ.
A side effect of the above scheme is that there is a constant demand for US$, driving its relative value higher than other currencies. A national currency, US$ is wanted and used by 8 billion people - no other currency has this much demand. This puts US exporters at an extreme disadvantage as their goods are priced higher in local currency in the rest of the world than local production in those countries. Slowly US industries die off - first goes simple stuff like Clothing and then even High Tech manufacturing moves out - nothing can escape the gravitational pull of this currency mismatch. The constant demand and overvaluation of US$ also means that people who have good jobs in the US do very well as their US$ buys more foreign goods, but people who don't, suffer. The Rich - Poor divide widens. Our billionaires were never richer, yet ~52% of the population don't pay taxes because they simply don't earn enough.
Combined with the "Free Trade" policy, a new business model takes off - "make in low cost countries and sell in high cost countries" (Steve Jobs may have been the innovator, but it was Tim Cook who made Apple the financial behemoth it is today using this formula). This makes the trade deficit even worse.
Starting in 2014, China breaks the above loop and stops accumulating US$ and US treasuries as the People's Bank of China recommends to the Chinese government that it's better to buy commodities using US$ than accumulating more US Government debt as the end result is likely US will simply devalue US$ (by printing - simplifying) to pay back China. China starts buying mines in Africa, finances "Belt and Road initiative", builds infrastructure in developing countries using the trade-surplus US$ (thus converting Fiat promises into Real goods and obligations).
The situation is now such that US Interest payments exceed US defense budget; US defense industrial base depends on China and other foreign countries (paraphrasing Admiral Mike Mullen - We are borrowing from China to build weapons to face down China). US is now in roughly the same situation as Great Britain was a 100-years ago - a Financial and Military superpower without much of an Industrial Base; China is more like what the US was a 100-years ago - an Industrial superpower with the world's largest economy (by PPP - Purchasing Power Parity measures).
Trump's economic team (Scott Bessent, Stephen Miran) understands the above dynamics very well. The policies you see now are trying to reverse the above trends. I think the tariffs are here to stay; they may not stay at levels he announced on April 2, but certainly are not going back "Free Trade"/~2.5% average tariff for goods coming into the US. This is also why he talks about "External Revenue Service" (revenue from tariff).
I am skeptical about all the industries that left the US coming back to the US, but I can't imagine, given the Fiscal and Defense Industrial base situation, US putting up with critical industries such as High Tech manufacturing not coming back. While TSMC and Taiwan deserve all the credit, I don't believe the tide is in their favor.
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