U.S. Launches Investigation into Chinese Chips Trade
The Biden administration has initiated a trade investigation into Chinese-made legacy semiconductors, focusing on chips used in common products such as automobiles, washing machines, and telecom equipment. This move, conducted under Section 301 of the Trade Act of 1974, could lead to additional tariffs targeting older Chinese chips trade. These actions are part of an effort to counter China’s state-backed semiconductor industry, which has been criticized for underpricing chips and undermining competition. The U.S. Trade Representative, Katherine Tai, emphasized that the investigation aims to protect American semiconductor producers and ensure fair competition in the global market.
Stock Market Reaction to the Announcement
The news of the investigation influenced the stock market, with semiconductor stocks showing mostly positive trends during premarket trading on Tuesday. Notable players in the sector experienced gains, including Broadcom and AMD, both rising by 1.8%, and Marvell Technology, which saw a modest increase of 0.4%. Exchange-traded funds (ETFs) like SOXX and SMH also edged higher, gaining 0.3% and 0.2%, respectively. However, not all companies benefited from the development. While Micron posted a slight increase of 0.1%, Nvidia and Taiwan Semiconductor recorded declines of 0.3% and 0.8%.
Implications and Global Concerns
The investigation comes amidst growing tensions over China’s dominance in the semiconductor industry. If tariffs are implemented, they could complement an existing 50% tariff on Chinese chips trade set to take effect on January 1. This development reflects the Biden administration’s proactive stance on addressing trade imbalances and curbing China’s influence in critical technology sectors. However, China’s commerce ministry has expressed concerns about the potential disruption to global chip supply chains, as reported by Reuters. The move could further strain U.S.-China trade relations, raising questions about its impact on international markets and supply stability.
The unfolding probe underscores the Biden administration’s commitment to bolstering the U.S. semiconductor industry while addressing competitive imbalances stemming from China’s policies. As the situation evolves, the global semiconductor market is expected to face increased scrutiny and potential shifts in trade dynamics.
