Trump tariff turbulence risks handing TSMC a win over American chip manufacturers — prior exemptions for onshoring manufacturing may hinder the likes of Intel
Following a rabid weekend of tariff rulings and press conferences, the Trump administration has settled on a blanket 15% tariff for basically all goods entering the United States. This has upended global trade as countries look to confirm their final rates, with many of them having previously negotiated different rates - some higher than 15%, some lower. While Bloomberg suggests China is a big winner of the redrawing of tariff percentages, it also threatens to hand companies like TSMC a big win by negatively impacting U.S. Chip companies like Nvidia and Intel.
Pledges and promises
Alongside investing in companies like Intel, the U.S. Government has used trade blocks and tariffs to push for companies like TSMC and Micron to open up new manufacturing facilities in America. If they do, they get discounts on their tariff rates. A major part of recent discussions between the U.S. And Taiwan (and particularly TSMC) was in securing a favorable tariff exemption, in exchange for further investment in American manufacturing facilities. The agreed-upon figure was 15%, though the details were scant. However, the prevailing sentiment was that with enough investment, tariffs might disappear entirely for a select few.
TSMC's announcement earlier this month that it could invest a further $100 billion in advanced manufacturing in Arizona was with the idea of taking advantage of a potential zero-tariff loophole. Companies looking to manufacture chips in the U.S. Could import up to 2.5 times the manufacturing capacity of planned facilities, and up to 1.5 times the manufacturing capacity once the facility begins production.
In late 2025, TSMC accelerated plans to bring its latest manufacturing facilities to the U.S. As a major show of solidarity with the Trump administration's goals.
That's all been thrown out the window as of this weekend's Supreme Court ruling and subsequent announcements. But if 15% was what Taiwan had gained for its efforts, and now it faces 15% regardless, it may have been given a golden opportunity. It may be able to leverage existing agreements and investment plans to secure a better-than 15% rate for its products, or it could drop them entirely and still likely only face the same 15% maximum tariff rate as everyone else.
And better yet, whichever avenue companies like TSMC go down, they'll have an advantage over American firms doing the same.
Building here still means importing here
The vast majority of the world's most advanced semiconductor manufacturing happens in Taiwan, but the Trump administration has made a major play to bring some of that to U.S. Shores, even claiming to want as much as 40% of TSMC's total manufacturing to be based in America in the future — something that TSMC has said is impossible.
But it has secured massive new manufacturing investments from international firms like TSMC, Micron, and others, as well as investing domestically in Intel. It's also thrown up major trade blocks to limit other countries' (particularly China) access to the latest AI accelerators and the equipment used to make leading-edge nodes.
These latest trade tariffs do nothing to help America or American businesses, though. In what is either a continued misunderstanding or a gaslighting attempt by the Trump administration, foreign companies do not pay the tariffs when goods are imported; the importing companies do.
That means for companies looking to import chips from TSMC, they'll have to pay that 15% fee, not TSMC. For companies looking to manufacture chips in America, they're still reliant on key raw materials for chip manufacturing. Broad tariffs raising the cost base for everything imported into America means raising prices on those key materials, in turn making U.S.-based chip manufacturing more expensive for everyone involved.
This comes at a poor time for Intel, which is hoping to bring its cutting-edge facilities online as fast as possible. Its planned Fabs have potential chip complexity and yield advantages over even some of TSMC's best facilities, though they have yet to start production. Increasing the costs of these raw materials and further squeezing supply chains is not ideal for such a venture.
A lack of clarity
Nothing is clear about these new tariffs, and there's a distinct possibility that they don't apply to semiconductors and electronics, or at least, aren't designed to.
The new tariffs are being brought in as part of Section 122 of the U.S Trade Act of 1974, which gives the executive branch limited and temporary ability to apply tariffs to imported goods. But as the Singaporean Ministry of Trade highlights, some products should be excluded from this Section.
"Certain types of goods are exempted from the Section 122 tariffs, such as energy and energy products, pharmaceuticals and pharmaceutical ingredients, certain electronics, certain aerospace products and metals used in currency and bullion, amongst others," it said in a statement over the weekend. "In addition, semiconductors and pharmaceuticals are not subject to the Section 122 tariffs, as they may be the subject of Section 232 tariffs that have not yet been imposed."
However, as White Case LLP highlighted in January, the Trump administration has already leveraged Section 232 for 25% tariffs on a limited selection of semiconductors imported into America. Those tariffs could easily be expanded with the legal justification that it's for matters of national security. Trump has previously used similar justifications to limit imports of Steel and Aluminum during his first term.
Uncertainty prevails
Although somewhat expected, the U.S. Supreme Court's ruling has thrown the Trump administration into chaos, and it has responded in kind. The new tariffs are sweeping, confusing, and very temporary, at least for now. It throws into question all existing deals, which were less foundationally secure than traditional trade agreements anyway.
In the near term, though, it's looking like some of the greatest beneficiaries of America's further turn inwards towards self-sufficiency may be helping anyone and everyone but America itself.
