(C) Reason Magazine

The Donald Trump administration is reportedly considering postponing the introduction of tariffs on imported semiconductors, a move previously and repeatedly announced by the President. Reuters, citing multiple individuals familiar with the matter, reported on November 19th (local time) that U.S. government officials have communicated to relevant parties in both the public and private sectors in recent days that the semiconductor tariffs may not be implemented soon.

President Trump had previously stated on August 6th that he would impose a tariff of "about 100% on semiconductors," targeting "all integrated circuits (chips) and semiconductors coming into the United States," with an exemption for companies that had already built or promised to build manufacturing plants in the U.S. On August 15th, he had even foreshadowed the imminent imposition, saying he would "set the semiconductor tariffs next week." However, over three months have passed since then, and the Trump administration has yet to announce any tariffs in the semiconductor sector.

Shifting Tides: China and Domestic Inflation 

Reuters suggests that this change in atmosphere is driven by a combination of the 'China variable' and domestic inflation concerns within the U.S. Imposing high tariffs on semiconductors could reignite the trade war between the U.S. and China, which is currently in a truce, potentially prompting China to reactivate its control over rare-earth exports.

Furthermore, the administration appears to be factoring in the increased inflationary pressure that semiconductor tariffs would introduce, especially ahead of the year-end 'holiday shopping' season. Analysis indicates that price increases due to tariffs were a major factor contributing to the significant losses of Republican candidates in some state and local elections on November 4th, as well as the recent dip in President Trump’s approval ratings.

Despite these reports, U.S. government authorities, including the White House and the Commerce Department, maintain that there is no change in the official government policy regarding semiconductor tariffs. However, they have not specified when the tariffs might be introduced.

South Korea's Stake 

Semiconductors, along with automobiles and machinery, are one of South Korea's top three export items to the U.S. According to the Korea International Trade Association, South Korea's semiconductor exports to the U.S. amounted to $10.6 billion last year. A recently announced Joint Fact Sheet from the U.S.-South Korea summit stated that the U.S. would not subject South Korea's semiconductor exports to less favorable treatment than agreements made with other countries in the future, although this is limited to nations with semiconductor trade volumes equal to or exceeding South Korea's.