Think Tank Says Tariffs Should Be Hiked on Chinese Legacy Semiconductors

A new Silverado Policy Accelerator report says not enough attention has been paid to China's production of mature or legacy semiconductors -- a category the paper calls "foundational" -- and the authors say ceding this market to China "would have significant national and economic security implications."

The authors say even with Section 301 tariffs on Chinese semiconductor imports, China continues to be able to undercut other producers on price, to a large degree because of its massive industrial subsidies to the sector.

They recommend that the International Trade Commission add new HTS codes for semiconductor products. "More detailed breakouts and better units of quantity would enable better tracking of the level and type of semiconductor imports that compete with U.S. production and the pricing level of those imports," they said. "The U.S. Department of Commerce should prioritize monitoring trade flows and prices of foundational semiconductors, as well as impacts on U.S. industry, to determine if there are grounds for an antidumping or countervailing duty investigation now or in the future."

They also recommend that the administration either rebalance the Section 301 tariffs or initiate a new Section 301 or Section 232 investigation for these kinds of chips.

"The potential benefit of targeted tariff increases is to discipline unfair, unreasonable, and discriminatory Chinese industrial policies that are harming U.S. commerce and undermining national security. Scoping any new tariff increases must consider how to account for not just semiconductors, but downstream products as well that include foundational semiconductors made by Chinese firms," the paper said.

"A tariff rate quota (TRQ) scheme could also be considered to prevent a surge of foundational Chinese semiconductors into the U.S. market as new capacity comes online," it said.