On Wednesday, US President Donald Trump announced that the United States would impose a 100% tariff on imported semiconductor chips unless companies make a formal commitment to build or expand production facilities within the US.

The move aims to restructure the global semiconductor supply chain by encouraging domestic manufacturing. Major companies like Apple which recently pledged over $100 billion in new US investments, raising its total commitment to $500 billion stand to benefit from tariff exemptions. Leading chipmakers such as TSMC, Samsung, and SK Hynix are also expected to qualify due to ongoing or planned production projects in the US.

Markets reacted in mixed fashion: SK Hynix shares initially fell 3.1%, but quickly recovered after a South Korean trade envoy confirmed that both SK Hynix and Samsung would be exempt from the tariffs because of their US manufacturing commitments. Meanwhile, US stock futures rose as investor confidence grew that companies like Apple and Nvidia would be granted exemptions amid a broader push for local production.

The announcement fits within Trumps broader protectionist approach, following a recent executive order that raised tariffs on India to 50% a move tied to oil trade between New Delhi and Moscow. The chip tariff announcement came after a US Commerce Department investigation into semiconductor imports, citing national security concerns. The administrations message is clear: foreign firms must invest in the US or face punitive tariffs.

However, experts warn that this action could disrupt global supply chains, drive up consumer prices, and create logistical challenges. Semiconductors are vital to industries ranging from automotive to renewable energy, and any disruption could have widespread repercussions.

Industrial leaders are already adjusting their investment and production strategies. Still, analysts remain cautious, noting that many of the announced commitments may be rebranded old plans rather than immediate factory expansions.

The situation is further complicated by how exemptions will be allocated particularly for chip-producing nations such as the European Union, South Korea, and Japan. These countries are closely watching US policy, especially in light of recent trade deals that capped some tariffs at around 15%.

How Will Trumps Chip Tariffs Work?

Trump announced the new chip tariffs at a White House event on August 6, stating that exemptions would be granted to companies committed to building chip manufacturing facilities in the US.

Details remain scarce its still unclear when the tariffs will take effect or how theyll impact chip-containing products like laptops.

There are a lot of exceptions, said Jason Miller, a supply chain professor at Michigan State University. Until we see the specific harmonized tariff codes that the duties will apply to, its impossible to fully understand the consequences.

The US already produces a significant number of semiconductors, exporting about $58 billion annually, according to US Census Bureau data. However, Miller noted that the US specializes in high-end chips, while less sophisticated, widely used chips are mostly imported from countries like Malaysia. The most advanced chips still come from Taiwan.

Data shows the US imports nearly $60 billion in chips each year. The US is not cost-competitive in producing low-end, generic chips like those found in household appliances, Miller said. It makes more sense to focus on high-end products where we have a competitive advantage.

Rogers agreed that expanding US chip manufacturing makes sense, pointing to progress made under the 2022 CHIPS and Science Act signed by former President Joe Biden. Still, he warned that chip industry expansion takes time building new fabs and training skilled workers doesnt happen overnight. Were on the right path, he said, but the road is long. We cant ramp up fast enough to meet total domestic demand. He also warned that the additional burden on companies could actually slow this progress.

What Does This Mean for Prices?

Experts told USA Today that these tariffs wont impact manufacturers as dramatically as other duties like the 50% tariff on steel and aluminum or the 25% on cars. However, they could still pressure companies already grappling with rising import costs.

This action is not deflationary in any way, said Miller. But frankly, we cant assess the inflationary impact until we know more.

John Mitchell, president and CEO of the global electronics trade association IPC, said the tariffs could raise the prices of laptops, home appliances, cars, and medical devices.

More than 60% of our member companies have reported that previous tariffs increased costs and delayed production, he wrote in a statement.

For products like cars, chips may represent a small portion of total production costs. Still, Ivan Drury, Director of Insights at car research firm Edmunds, called the tariffs another wound for the auto industry which already faces a 25% tariff on vehicle imports.

Automakers say theyre already incurring losses. General Motors said in July that tariffs cost it over $1 billion in Q2 alone. Stellantis estimated tariffs would cost it $1.7 billion this year.

Its death by a thousand cuts, said Drury. Automakers are currently absorbing the costs, but he questioned how long that can continue: We havent seen it show up in consumer prices yet, but shareholders wont tolerate that forever.

He also warned that used car owners could be hit hard by rising repair costs, as repair shops may pass higher chip prices directly to customers. More expensive repairs could also drive up insurance premiums.

Its a snowball effect, he said. It hasnt hit yet but we know disruption is coming.

Could There Be a Shortage?

Another concern for consumers is whether the tariffs might make some products harder to find.

The US already experienced such a scenario during the COVID-19 chip shortage, which restricted access to new cars, laptops, and gaming consoles.

While the new chip tariffs arent expected to cause such a widespread shortage, Rogers warned that some companies may reduce output if import costs rise too high. Stellantis, for example, halted production at certain factories to avoid paying duties a move that contributed to a 6% year-over-year drop in vehicle shipments in Q2.

I think we could see shortages in several areas, Rogers said. It wont be like 2021 when chips were unavailable altogether. But in this case, well just have to pay more and when things cost more, we tend to buy less.