US punishes China’s ‘dominance’ of legacy chips with zero percent tariffs

Summary

The United States Trade Representative has issued a Notice of Action following a Section 301 investigation into China’s practices in the semiconductor sector. The probe focused on “foundational” or legacy/mature-node semiconductors used across critical industries such as defence, automotive, medical devices, aerospace, telecommunications and the power grid. The investigation concluded that China has pursued dominance in semiconductors through aggressive non-market policies that disadvantaged US firms and workers.

The Notice deems tariffs appropriate but sets them at zero per cent until mid-2027. Tariffs will rise on 23 June 2027, with the final rate to be announced at least 30 days beforehand. The administration frames tariffs as a negotiating tool to encourage investment in US manufacturing — a continuation of tactics that, alongside the CHIPS Act, have already drawn companies such as TSMC and Samsung to build in the United States.

Key Points

The USTR issued a Notice of Action after a Section 301 probe into China’s semiconductor policies (initiated December 2024).
The investigation targeted “foundational” (legacy/mature-node) semiconductors used in critical sectors including defence and telecoms.
The US concluded China used sweeping non-market policies to seek dominance, harming US companies and workers.
Tariffs are judged appropriate but set at 0 per cent until mid-2027; increases begin on 23 June 2027 with rates decided at least 30 days prior.
The administration says tariffs are intended to bring partners to the negotiating table and spur onshore investment, echoing CHIPS Act incentives that attracted TSMC and Samsung.
Prior threats of very high levies (25–100 per cent) from President Trump are not reflected in this Notice.

Context and relevance

This move sits at the intersection of trade policy, national security and semiconductor supply-chain strategy. Legacy chips remain critical in many industries; signalling tariffs now — but delaying their effect — gives companies time to decide whether to invest in US production or seek alternatives. For procurement, supply-chain and strategy teams, this is a clear policy signal that trade barriers may change in 2027 and that onshore capacity will continue to be prioritised.

It also continues a broader trend: the US is using a mix of carrots (CHIPS Act subsidies and incentives) and sticks (tariff threats and notices) to re-industrialise chip manufacturing. The announced timetable is important because it creates a window for negotiation, investment decisions and potential reshaping of sourcing strategies.

Why should I read this?

Because this is the policy nudge that could reshuffle supply chains. Tariffs are set at zero now, but the 2027 deadline matters — firms that make, buy or design hardware should care. It’s not a sudden shock; it’s a timed warning that could force manufacturers and buyers to rethink where they make and source chips. Short version: keep an eye on your procurement and investment plans.

Author style

Punchy: this is a strategic play, not just headline-grabbing noise. If you work with hardware, defence, telecoms or autos, the details matter — read the Notice and start planning.

Source

Source: https://go.theregister.com/feed/www.theregister.com/2025/12/24/us_china_chip_tariffs/