The Biden administration has launched a trade investigation into Chinese-produced “legacy” semiconductors. This action, announced on Monday, could pave the way for higher U.S. tariffs on these essential components used in numerous consumer products.
What Happened: The “Section 301” investigation is slated to transition to the incoming administration of President-elect Donald Trump for completion. This could provide Trump with a chance to enforce the hefty 60% tariffs he has previously threatened on Chinese imports, Reuters reported on Monday.
Currently, a 50% U.S. tariff on Chinese semiconductors is set to begin on Jan. 1. The U.S. has also intensified export restrictions on advanced AI and memory chips to China, alongside increasing tariffs on other Chinese goods.
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The U.S. Trade Representative’s office, led by Katherine Tai, explained that the probe seeks to shield market-driven chip producers from China’s state-driven expansion. Tai highlighted evidence of China’s attempts to dominate the semiconductor industry, similar to its strategies in other sectors.
The Biden administration will start accepting public comments on the probe on January 6, with a public hearing scheduled for March. The investigation will also evaluate the impact of these chips on critical industries, including defense and automotive sectors.
Why It Matters: This latest probe is part of a broader strategy by the Biden administration to curb China’s influence in the semiconductor industry. Earlier this month, the administration implemented its third crackdown on China’s semiconductor sector within three years, citing national security concerns. This initiative imposed export restrictions on 140 Chinese entities, including chip equipment manufacturers such as Naura Technology Group, targeting advanced memory chips and chipmaking tools. As a result, Nvidia Corp. (NASDAQ:NVDA) saw its stock trade lower due to potential impacts on its sales in China.
In response, China swiftly retaliated by tightening controls on critical minerals used in chip manufacturing, such as gallium, germanium, and antimony. These materials are crucial for advanced electronics and defense applications. The Chinese Ministry of Commerce justified these measures as necessary for national security, highlighting the escalating tensions between the two nations.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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