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Lawmakers Urge USTR to Reconsider Proposed Additional Tariffs on Mainland Chinese Semiconductors

A group of more than 45 House of Representative lawmakers recently urged USTR Lighthizer to reconsider a proposal to impose an additional tariff of 25 percent on US$6.3 billion worth of imports of semiconductor devices, semiconductor manufacturing equipment and related products from mainland China. According to a letter sent by the lawmakers to Lighthizer on 27 July, such a tariff would “not only fail to encourage China to address forced tech transfer and IP theft, it will adversely impact the semiconductor industry value chain in the United States.”

The lawmakers state that most U.S. imports of semiconductors from mainland China are designed and manufactured by U.S. companies, largely in the United States, and then shipped to mainland China for final assembly, testing and packaging. According to the letter, this step in the semiconductor manufacturing process accounts for approximately 10 percent of the value of the final product and does not result in the transfer of valuable intellectual property. On the other hand, mainland Chinese companies export almost no semiconductors to the United States while imports of finished semiconductor tools from the mainland are “essentially non-existent.”

Rather than “misdirecting penalties at the U.S. semiconductor value chain,” the letter adds, the Trump administration should explore more effective and targeted policies such as penalties for state actors engaging in intellectual property theft, pursuing dispute settlement cases at the World Trade Organisation, and strengthening multi-lateral action with U.S. allies to address the transfer of sensitive technology.

The U.S. semiconductor sector directly employs some 250,000 workers in the United States and has manufacturing operations in 19 states, with U.S. semiconductor companies accounting for about half of the global market for these products, according to the letter. Semiconductors are currently the United States’ fourth largest export, with a total surplus of US$6 billion in 2017, including a bi-lateral surplus with mainland China.

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