Semiconductors are the fourth most traded good globally and impact a host of consumer goods. Semiconductor supply chain is complex, with different economies dominating different parts. US administration is conducting investigations into semiconductor supply chains; threatening tariffs. US industry representatives prefer domestic incentives over tariffs, Standard Chartered's economists Madhur Jha and Ethan Lester report.

Tariff impact could be far-reaching

"US reciprocal tariffs on 2 April excluded semiconductors as these are subject to separate investigations that could result in 25% tariffs being imposed once they are concluded. US officials have indicated that these investigations are ongoing given national security concerns and the desire to dominate the AI development race, despite the recent détente in trade tensions. Semiconductors are the fourth most traded good globally, accounting for >4% of 2024 global exports. This excludes downstream connected sectors, three-quarters of which comprise electronics and other segments of the semiconductor industry."

"The US dominates around half of the semiconductor supply chain. However, the supply chain is complex, with several chokepoints and a small number of economies dominating different parts of it. While China is the focus of more than one investigation into semiconductors, other economies like Mexico, Taiwan, Japan and Korea are deeply integrated into the semiconductor supply chain and are vulnerable to higher tariffs."

"US industry representatives have indicated a preference for more domestic incentives over a blanket 25% tariff given the complexity of the supply chain and the cascading impact on broader industry sectors. Globally, the impact of semiconductor tariffs is likely to be far-reaching given semiconductors’ increasingly important role in a wide range of sectors. Analysis suggests that for the US, a 25% tariff on semiconductors could lower GDP growth by 0.2ppt in year one."