Chips won't taste good unless made in US

The Trump administration is weighing a fresh round of tariffs on imported semiconductors, potentially escalating levies on foreign chips in a bid to lure more manufacturing to the US, commerce secretary Howard Lutnick said Wednesday.

However, Lutnick told CNBC, those levies are likely to be paired with tariff relief for companies that invest in domestic manufacturing, modeling the approach the Trump administration has used on the pharmaceutical industry.

"That's what you should look for in semiconductors: If you build in America, we will give you tariff relief, and if you don't build in America, you will pay tariffs," Lutnick said. "That's pretty much a very sensible way of doing things, and it's working."


President Donald Trump already imposed 25% tariffs on certain advanced semiconductors, ordering those import charges in January after a Commerce Department probe into the trade. However, a new round of tariffs could extend their reach beyond semiconductors to products containing chips - hitting imports of data center servers and consumer electronics.

Critics have warned that additional tariffs could make it more costly to build data centers in the US. But Lutnick cast the inducement of tariff relief for domestic fabrication as a potential solution.

"I think what you're going to see is targeted, thoughtful tariff policy that basically says 'if you build here you don't pay, but if you don't build here, expect to pay to enter the greatest market in the world,'" Lutnick said. "All of the companies know they're coming. They've all gone through it."

Already, he said, there's been some $1.2 trillion in commitments to build semiconductors in the US, with companies such as Taiwan Semicondcutor Manufacturing Co. Ltd. and Micron Technology Inc. investing in domestic facilities.

Some of that has been fed by the US-Taiwan trade pact finalized earlier this year. Under that agreement, Taiwan pledged some $500 billion in investments and credit guarantees to support high-tech manufacturing in the US. Lutnick said an additional round of investment pledges from Taiwan will be announced next week, with the island announcing another $20 billion or $30 billion worth of commitments.