Korea, Japan, Taiwan highlight potential US chip tariff pitfalls, call for rethinking new levies
The Ministry of Trade, Industry and Energy at the Sejong Government Complex in Sejong is seen in this March 30, 2022 photo. Yonhap
Korea, Japan and Taiwan have underscored the potential pitfalls of possible U.S. tariffs on chips and semiconductor manufacturing equipment (SME), warning that the duties, if imposed, would raise costs for the U.S. chipmaking industry and hinder efforts to reinforce supply chain resiliency.
They have submitted to the U.S. Commerce Department their respective comments on U.S. President Donald Trump's administration's national security investigations into imports of semiconductors, SMEs and derivative products. Commerce Secretary Howard Lutnick initiated the probes on April 1 under Section 232 of the Trade Expansion Act of 1962.
Under Section 232, the president is provided with authority to adjust imports into the U.S. when he determines they threaten to impair national security. The ongoing investigations are seen as a key step toward the rollout of new tariffs as Trump has been using tariffs to reduce America's trade deficit and bolster domestic manufacturing.
The three chipmaking countries highlighted the mutually "complementary" nature of their economic partnerships with the United States while reiterating their commitment to beefing up the partnerships.
"Our two countries have built mutually complementary and interdependent supply chains: the U.S. leads in design, SMEs and intellectual property, while Korea has specialized in the production of memory chips," Korea's industry ministry said in its comment.
"If the Section 232 National Security Investigation results in the adoption of import restrictive measures on semiconductors and SMEs, it will disrupt this balance and has the potential of ultimately weakening the U.S. semiconductor industry and economy overall," it added.
The ministry pointed out that Korea's high bandwidth memory and advanced dynamic random access memory are "essential" components in expanding the U.S.' artificial intelligence (AI) infrastructure, as it underlined the need for closer cooperation to help solidify America's AI leadership.
"Korea respectfully requests a strategic and prudent approach to any trade restrictive measures so that we may work together to continue to secure and strengthen the U.S.' AI capabilities through a stable supply of high-quality semiconductors," it said.
The ministry also noted "mounting" concerns that tariffs may significantly increase the total costs associated with Korean and other semiconductor companies' investments in the U.S.
"We therefore ask for special consideration to ensure that companies can proceed with their investments in a stable manner," it said.
Samsung semiconductor plant in Taylor, Texas, Jan. 2 / EPA-Yonhap
Moreover, the ministry said that if tariffs are imposed on products used in everyday consumer applications, it would likely lead to higher product costs, which it warned will ultimately be passed onto consumers and negatively impact the U.S. economy.
"Korea and the U.S. have maintained a well-balanced trade relationship in semiconductors and SMEs, and are long-standing security allies," it said. "Accordingly, we hope that the U.S. adopts a practical and flexible approach to Korea that fully takes into account this important partnership."
In its comment, the Japanese government called on the U.S. to reconsider the series of its tariff measures in the spirit of "mutual trust and collaboration."
"Given the long-standing and deep-rooted cooperation between Japan and the U.S., the imposition of tariffs on semiconductors and related products would constitute a significant departure from our shared strategic objectives," Tokyo said.
"Such measures could impede U.S. efforts to expand domestic semiconductor production capacity and enhance the resilience of its supply chains."
The Taiwanese government requested a tariff exemption, saying that an exemption would promote the joint development of the two countries' semiconductor industries, optimize the industrial systems of both sides and enhance their collective global competitiveness.
"If the U.S. imposes tariffs ... it would not only increase production costs for U.S. companies and undermine their technological innovation and market competitiveness but also diminish the willingness of Taiwanese enterprises to invest in the U.S.," it said.
"This would likewise weaken Taiwan's capacity to establish a robust industrial presence in the U.S., heighten the risk of supply chain disruptions and adversely affect the development of the U.S.' AI, defense technology and high-tech industries, ultimately posing negative implications for U.S. economic and national security strategies."
The Chinese government accused the U.S. of having extended the concept of national security since 2017, using it as a "pretext" to launch investigations to impose trade protectionist measures, including additional tariffs on imports of steel, aluminum and automobiles.