us trade probe targets chinese chip dominance
Washington D.C., Tuesday, 24 December 2024.
The United States has launched a trade investigation into China’s semiconductor industry, focusing on the country’s state-subsidized production of ‘legacy’ chips. This move under Section 301 of the Trade Act of 1974 aims to address what the U.S. claims are China’s anti-competitive and non-market strategies to dominate the global chip market. The inquiry could lead to increased tariffs on a range of consumer goods, potentially impacting international semiconductor supply chains. This investigation underscores ongoing trade tensions between the U.S. and China, with significant implications for global economic dynamics. It also highlights concerns about reliance on Chinese-manufactured chips, which are widely used in various sectors, including automotive and healthcare. The outcome of the probe, which will be taken up by the incoming Trump administration, could reshape the competitive landscape for global semiconductor markets.
Market implications of the probe
The investigation has sparked concerns about potential market disruptions, as Chinese-made chips are present in two-thirds of U.S. products [1]. The probe specifically targets legacy semiconductors, which are crucial components in everyday consumer goods from automobiles to medical devices [2]. Under the incoming Trump administration, this could lead to tariffs as high as 60% on Chinese imports [3], potentially affecting global supply chains and consumer prices [GPT].
Strategic industry concerns
U.S. Trade Representative Katherine Tai has indicated that Beijing is pursuing semiconductor industry dominance through extensive state subsidies [3][5]. According to Commerce Secretary Gina Raimondo, China plans to control over 60% of global legacy chip production capacity within the next decade [1]. This expansion could suppress investment in other regions and create unfair market advantages [1].
National security considerations
The investigation reflects growing concerns about supply chain vulnerabilities, with half of U.S. companies, including defense contractors, unaware of their chip sources [1]. The Biden administration has already implemented measures to strengthen domestic semiconductor production through $52.7 billion in subsidies [1]. This probe represents a continuation of aggressive trade policies toward China, which both Biden and Trump administrations have maintained [3].