US-China Chip Tariff Dispute Escalates: Imposition of High Tariffs by 2025 Causes Global Market Turmoil and Price Hikes

In April 2025, President Trump of the United States imposed a 145% tariff on chips imported from China, and China countered with a 125% tariff on chips from the United States, leading to upheaval in the global semiconductor market. The prices of Chinese chips skyrocketed, resulting in a wave of panic buying, and many distributors halted price quotations. China's new regulation regards the wafer fabrication site as the place of origin, affecting U.S. manufacturers such as Intel and forcing companies to reevaluate their supply chain arrangements.

U.S. Imposes 145% Tariffs on China, China Retaliates with 125%

On April 9, 2025, President Trump of the United States announced the implementation of a "reciprocal tariffs" policy on Chinese imports, with a total tariff rate on Chinese chip products reaching 145%, including a previously imposed 20% tariff and an additional 125%. Just two days later, on April 11, China announced that starting April 12, it would impose a 125% retaliatory tariff on semiconductor products originating from the U.S., in response to the U.S. measures.

The China Semiconductor Industry Association simultaneously issued an emergency notice, clearly stating that the "country of origin" for imported chips will be determined by the location of the wafer fabrication plant, rather than the packaging site. This move directly targets chip products manufactured in the U.S., excluding those made in Taiwan, South Korea, and other regions, further targeting U.S. domestic chip manufacturers like Intel, Texas Instruments, and GlobalFoundries.

Chip Costs Surge, Manufacturers Pass on Costs

Following the implementation of the tariff measures, chip costs rose rapidly. U.S. memory chip giant Micron has notified Chinese customers that it will add surcharges related to tariffs on products such as DRAM and SSDs. To maintain profit margins, many chip manufacturers have chosen to pass the costs onto downstream customers, leading to a comprehensive increase in chip prices.

According to Chinese media reports, spot prices for mainstream products such as memory chips, analog chips, and automotive power semiconductors have shown phenomena like "a new price every day" or even "a price increase every minute." Several Chinese semiconductor industry players have pointed out that the market has fallen into a panic buying and hoarding frenzy, causing supply chain tension and price instability.

Buying Frenzy Sweeps Chinese Market

In mainland China, chip buyers and end-users are scrambling to purchase spot goods to avoid future supply disruptions and further price increases. Several agents, including Chinese agents for Micron, Texas Instruments, and ADI, have stopped quoting prices to customers, plunging the market into high uncertainty.

A Chinese chip manufacturer stated, "Ask one minute, and the price goes up the next." Another industry player noted, "Without demand, price increases are useless." Despite the buying frenzy, unlike the global chip shortage in 2021, the current demand has not substantially increased, only responding to short-term policy risks.

New Rules on Country of Origin Reshape Supply Chain

Another key aspect of China's tariff policy is the change in the "country of origin" determination method. According to China's General Administration of Customs Order No. 122, the country of origin for integrated circuit products will be based on the location of the wafer fabrication plant. This means that even if chips are manufactured in the U.S. and packaged in Taiwan or Southeast Asia, they will still be considered U.S.-origin and subject to a 125% tariff.

This move directly impacts companies with wafer plants in the U.S., such as Intel and Texas Instruments. Conversely, U.S. design companies like AMD and Qualcomm, which outsource manufacturing to TSMC, can avoid China's retaliatory tariffs as their products are recognized as originating from Taiwan.

Market Price and Supply Chain Reactions

According to multiple media reports, chip prices have rapidly increased since the announcement of the tariff policy. For example, DRAM and SSD prices in the Chinese market are being adjusted hourly. Some spot traders have even stopped quoting prices, waiting for the market to stabilize before re-pricing.

Additionally, the chip supply chain has been significantly disrupted. Since chip manufacturing involves multiple countries' processes, from design, fabrication, packaging to testing, companies need to reassess their supply chain layouts to comply with the new country of origin rules. Some U.S. companies have already begun considering shifting manufacturing to Taiwan, Vietnam, or Malaysia to maintain their export capabilities to the Chinese market.

Stock Market Reactions and Industry Shock

In response to the tariff news, U.S. chip manufacturers' stock prices have seen significant declines. Texas Instruments' stock price once fell by 10%, hitting a 52-week low; Intel fell by 9%; GlobalFoundries fell by 3%. Conversely, Chinese domestic chip companies like SMIC and Hua Hong Semiconductor saw their stock prices rise, increasing by 5.9% and 14.1%, respectively.

References

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