Uncertainty Over Us Chip Tariffs

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Uncertainty Over Us Chip Tariffs

Uncertainty Looms Over Us Chip Tariffs

According to Standard Chartered, there's a lot of uncertainty over the chip tariffs imposed by the USA. Over the long run, this will affect a lot of other market sectors, and the consequences will not just be limited to the semiconductors.

On a global scale, the 4th most traded good is semiconductors, which highlights its importance in the modern world. The supply chain of the semiconductors is also very complex, with multiple players.

Semiconductor Supply Chain Is Complex

But the chip supply chain is now being threatened by the US administration's threats of tariffs. Meanwhile, the industry representatives from the USA prefer the incentives in the domestic market as compared to tariffs.

During April, the reciprocal tariffs from the USA didn't include the semiconductors as they are being investigated separately. However, Standard Chartered believes that around 25% tariffs could be put on the chips.

The key reason behind these tariffs and even bans on chip imports is to ensure that the USA wins the AI race. As of now, 4% of the global exports consist of chips, which highlights their importance.

About half of the semiconductor supply chain is controlled by the US. The supply chain is intricate, though, with a few chokepoints and a few economies controlling various segments.

So, while China remains the key focus of the investigation, other economies could be at risk too! This includes Korea, Japan, and Taiwan, which are also big players in the semiconductor supply chain.

Representatives of the US industry have stated that they would rather have more domestic incentives than a 25% tariff. After all, the global impact of tariffs on chips will also engulf other sectors as well.

25% semiconductor tariff on the US could reduce GDP growth by 0.2 percentage points in the first year, according to analysis.

So, based on this analysis from Standard Chartered, the US tariffs will have far-reaching consequences for a lot of other sectors and even countries.

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