Countries Racing to Get Tariff Exemptions: Tobin

Key Concepts:

• Semiconductor Tariffs (Section 232 investigations)
• Trade Negotiations (US with South Korea, Japan, EU)
• Trusted Allies and Partners vs. China
• Defense Spending
• CHIPS Act
• Equity Stakes (Government in Semiconductor Companies)
• Economic Emergency
• Industrial Strategy
• Secure Enclave Program
• Semiconductor Supply Chain Dependence (TSMC)

1. Semiconductor Tariffs and Trade Negotiations:

• The US Commerce Department has been conducting Section 232 tariff investigations on semiconductors for months, but decisions are being delayed.
• These investigations are now intertwined with ongoing trade negotiations between the US and South Korea, Japan, and the EU.
• Countries are seeking exemptions or lower tariff rates, but the outcome remains uncertain until agreements are finalized.
• The key question is whether there will be a distinction between China and US allies/partners regarding tariffs, considering their roles in the semiconductor supply chain.

2. US-South Korea Relations and Trade Pressure:

• President Trump has historically pressured allies like South Korea and Japan on both trade and defense spending.
• A recent confusing statement from President Trump directed at the South Korean president raises concerns about upcoming talks.
• South Korea is likely to face pressure on both trade and defense spending during negotiations.

3. Equity Stake in Intel and Government Intervention:

• The US government's 10% equity stake in Intel, funded by CHIPS Act money, aims to reduce dependence on TSMC and Samsung.
• The government's intervention is viewed as an "insurance policy" to address the economic emergency of US dependence on Taiwan for advanced semiconductors.
• The US government is trying to "rescue Intel" to ensure a domestic supply of chips.
• Liza Tobin questions whether an equity deal is the most effective form of government intervention, suggesting that long-term, reliable demand might be more beneficial.

4. Secure Enclave Program and National Security:

• Intel, under the CHIPS Act, is the steward of the Secure Enclave Program.
• This program aims to ensure a minimum viable number of chips are produced in the US for defense and national security needs.
• The goal is not to reshore the entire semiconductor supply chain but to create an "insurance policy" for critical chip production in case of contingencies.

5. Trusted Partners and Allies:

• The idea of calling certain countries "trusted partners and allies" is highlighted.
• The question is whether these trusted partners will be treated differently than China in terms of tariffs and trade policies.

6. Economic Emergency and Government Role:

• The US dependence on TSMC for advanced semiconductors is described as an "economic emergency."
• Extraordinary government intervention is considered necessary to address this emergency.
• The government's role is not just as a business entity but as a protector of national economic security.

7. Conclusion:

The future of semiconductor tariffs and trade relations is uncertain, with ongoing negotiations and investigations. A key factor is whether the US will differentiate between China and its allies/partners in the semiconductor ecosystem. The government's intervention in Intel, through an equity stake and the Secure Enclave Program, reflects a strategy to mitigate the economic risks associated with dependence on foreign semiconductor suppliers and to ensure a domestic supply for critical national security needs. The effectiveness of this intervention remains to be seen, with alternative approaches like guaranteeing long-term demand also being considered.