Trump Launches Section 232 Investigation, Proposes Tariffs on Semiconductors and Pharmaceuticals

The Trump administration promoted a trade investigation led by the Department of Commerce.Semiconductors and pharmaceuticalsThe plan to impose import tariffs. The measures announced on Monday in the Federal Register are a prelude to the imposition of tariffs and could potentially expand Trump's global trade war.

The Ministry of Commerce stated in two notices that it has initiated an investigation"Semiconductor and semiconductor manufacturing equipment" "Medicines and pharmaceutical ingredients, including finished pharmaceutical products"The impact of imports on U.S. national security. These investigations, which began on April 1st, were ordered under Section 232 of the Trade Expansion Act and may last for months. According to the law, the Secretary of Commerce should submit the investigation results within 270 days, but Trump and other officials have indicated that these tasks might be concluded more quickly.

Trump has long condemned the national security threat posed by foreign-made pharmaceuticals and chips and has threatened tariffs on imports to revive U.S. manufacturing of these products. But these tariffs also have the potential to seriously disrupt supply chains and raise costs for Americans.

From cars to airplanes, from mobile phones to consumer electronics, these products all rely on semiconductors, with global semiconductor sales exceeding $600 billion. Currently, the supply chain is still feeling the chaotic effects caused by the COVID-19 pandemic and may now face new impacts from U.S. tariffs.

Trump's frequent shifts in his comprehensive tariff plans have sent mixed signals to the markets, businesses, and trade partners, who are striving to negotiate with the White House to reach dozens of new agreements aimed at reducing trade imbalances.

Trump said on Monday that he expects to impose tariffs on imported drugs “sooner rather than later.”

Trump said to the reporter:"Listen, I'm a very flexible person. I don't change my mind, but I am very flexible."

"I've been helping Tim Cook and the whole business recently," he continued, referring to the CEO of Apple Inc."I don't want to hurt anyone. But the end result is that our country will achieve greatness."However, Trump said last weekend that the exemption on tariffs for technology products (seen as a boon for tech giants like Apple and Nvidia) would be temporary, adding that these imports would eventually face different, industry-specific tariffs.

The Ministry of Commerce's investigation into semiconductors has a wide scope, as it aims to assess the import situation of both traditional chips and advanced chips sought after for artificial intelligence applications. According to government notifications, this investigation will cover all semiconductors, equipment used to manufacture semiconductors, and electronic products that contain these components. The imposition of tariffs on the semiconductor industry could affect numerous companies that export billions of dollars worth of microprocessors and related products to the United States each year.

These measures could also increase the cost of Trump’s vision for expanding domestic semiconductor production, especially if import duties are levied on chip manufacturing equipment from companies such as ASML Holding NV. Based in the Netherlands, ASML is a leading supplier of advanced lithography machines, which are used to produce the smallest computer chips utilized in artificial intelligence and other sensitive applications.

Analysts warn that bringing chip manufacturing to the US will require years of arduous effort.

Separate drug investigations will examine imports of all drugs, including generics and generic finished products as well as materials used to make those drugs. Investigators will also look into imports of key pharmaceutical inputs.

Tariffs will also hit global pharmaceutical giants like Merck & Co. and Eli Lilly & Co., which have dozens of production bases around the world. Before tariffs may be imposed in the U.S., pharmaceutical companies have announced significant investments in the United States.

Recently, Swiss pharmaceutical company Novartis AG announced plans to invest $23 billion in the United States over the next five years, following similar commitments from Eli Lilly, Merck, and Johnson & Johnson. However, experts warn that this is likely not enough to mitigate the impact of tariffs.

Leerink Partners analyst David Risinger said in a note to clients ahead of the announcement, "We believe the companies impacted cannot quickly fix the problem. Reregistration would take years and be very costly."

In this already the most expensive market in the world, pharmaceutical companies will face two choices: either absorb the costs brought by potential tariffs or raise drug prices.

Trump has repeatedly criticized American pharmaceutical companies for their reliance on overseas production, and he is breaking with tradition that has lasted for decades. For many years, the pharmaceutical industry has managed to avoid trade wars and has been protected by international agreements, which largely shield medicines from tariffs on humanitarian grounds.