The US reportedly plans to invoke Section 301 of the Trade Act to investigate Chinese semiconductors, focusing on mature process chips in medical devices, cars, and smartphones. The probe, driven by concerns over China's dominance and low chip prices, may lead to tariffs. Findings are expected in six months.
The US government is reportedly gearing up to invoke Section 301 of the Trade Act of 1974 to launch a trade investigation focusing on Chinese semiconductors, according to sources cited by Bloomberg. The investigation aims to scrutinize imports of mature process chips, alongside medical devices, automobiles, smartphones, and weapons that incorporate these chips. Based on the findings, the US could potentially impose tariffs or introduce other restrictive measures concerning these imports.
Concurrently, coverage by The New York Times suggests the US government has been deliberating how to proceed with a trade investigation. It considered using either Section 232 of the Trade Expansion Act, which addresses national security threats under the Department of Commerce's purview, or Section 301, which deals with burdensome or unfair practices affecting US trade, managed by the US Trade Representative.
In a recent development, a letter from a Washington-based industry association to its members disclosed that a decision was made during a government meeting to invoke Section 301. This decision delegates the responsibility of initiating the trade investigation to the US Trade Representative. The investigation's findings are expected to take at least six months to compile, meaning the newly elected President Trump would decide on any subsequent actions.
In response to these rumors, the US Trade Representative's office and the Department of Commerce declined to comment.
The US government is increasingly concerned about the potential economic impact if China significantly increases its output of semiconductors on mature process nodes. The US estimates indicate that up to 50% of the new global capacity for mature process chips in the coming three to five years might be supplied by China. This concern is amplified by a Department of Commerce study revealing that chip prices from China are 30% to 50% cheaper than those in the US, with some prices even dipping below production costs.
Peter Harrell, a non-resident fellow at the Carnegie Endowment for International Peace and former White House economic official, highlighted that the biggest hurdle for the US in restricting Chinese semiconductor imports is that its imports traditionally have consisted more of products containing chips, rather than the chips themselves. Historically, US tariffs have predominantly targeted finished goods, complicating efforts to impose direct restrictions on component-level imports like semiconductors.
