The Trump administration is preparing to impose tariffs on semiconductors and pharmaceuticals, revealing Monday that it is conducting national security investigations into those sectors’ imports, according to Federal Register notices.
The development comes as the global trading order is still adjusting to a series of levies Trump imposed – and sometimes withdrawn – over less than two weeks, rocking financial markets.
Pharmaceuticals and semiconductors have been exempt from the 10% tariffs imposed on most imports beginning April 5, but Trump has stated that they will face separate duties. On Sunday, he stated that the tariff rate on semiconductors would be announced in the coming week, but he left room for flexibility with some companies.
According to Monday’s filing, the investigations began on April 1, and the tariffs would be imposed under Section 232 of the Trade Expansion Act of 1962, which gives the president the authority to protect national security.
The US relies heavily on Asian sources, such as Taiwan, for semiconductors that control electrical currents. Additionally, the US imports the majority of its pharmaceutical ingredients and production from India and China.
Trump sees this reliance as a security risk, and he believes tariffs can bring more manufacturing to America. According to drugmakers, the duties could lead to shortages and reduced patient access. Even if they don’t, the process would take a long time.
The Trump administration recently announced some technology tariff exemptions, which include the majority of the steep tariffs Trump imposed on Chinese imports such as smartphones, computers, and flat-screen televisions. The exemptions were a rare source of good news for the battered financial markets, and US stocks closed higher on Monday.
China is not backing down, increasing its tariffs on US goods and stifling the flow of valuable rare-earth metals and magnets into the US.
Trump ponders exemptions from auto tariffs
Trump has stated that he is considering temporary exemptions from his 25% auto tariffs to give automakers more time to transition to manufacturing in the United States.
Trump’s remarks from the Oval Office came after his administration exempted smartphones, computers, and other electronics from steep reciprocal tariffs on April 11, a move his economic advisers said would be temporary.
“I’m looking at something to help some of the car companies, where they’re switching to parts that were made in Canada, Mexico and other places,” Trump said on April 14, 2019. “And they need a little bit of time, because they’re going to make them here.”
Exemptions from auto tariffs, including 25% levies on foreign cars, light trucks, and auto parts, could provide relief for automakers facing rising vehicle prices for American consumers. Following Trump’s comments, stock shares of the three largest automakers in the United States, Ford, General Motors, and Stellantis, rose sharply.
China cuts off flow of minerals. Can US firms step in?
According to the New York Times, China has suspended exports of many rare-earth minerals and magnets that are critical to automakers, aerospace manufacturers, semiconductor companies, and military contractors worldwide. Chinese ports have halted shipments while the government drafts a new regulatory system, potentially preventing supplies from reaching American military contractors and companies.
“Drones and robotics are widely considered the future of warfare,” James Litinsky, CEO of MP Materials, the only rare-earth mining and processing company based in the United States, told the Times. “Based on everything we are seeing, the critical inputs for our future supply chain are shut down.”
According to Litinsky in a post on X, the ability to refine minerals on a large scale is rare, not the minerals themselves. In January, the company announced that commercial production of the magnets had begun, with plans to start supplying magnets to General Motors and other manufacturers by the end of the year.
China, Vietnam trying to ‘screw’ US on trade, Trump says
Trump accused China and Vietnam of conspiring to “screw the United States” as leaders of the two communist-run countries signed trade agreements on April 14.
Amid an escalating US-China trade war, Chinese President Xi Jinping and Vietnam’s top leader, To Lam, met in Hanoi and reached new agreements on supply chains, railway cooperation, and other issues.
Their meeting came after President Trump raised tariffs on Chinese imports to 145% last week, prompting China to retaliate against US exports. Meanwhile, Vietnam is one of more than 75 countries negotiating trade deals with the Trump administration in order to avoid steep reciprocal tariffs.
“I do not blame China or Vietnam. I see they are meeting today. Isn’t it wonderful? “That’s a lovely meeting,” Trump said, adding that they’re “trying to figure out how to screw the United States of America.”
Financial markets rally
Financial markets have struggled in recent days, beginning with a series of announcements imposing tariffs on products from certain countries, including Canada, China, and Mexico, as well as steel and aluminum. In the days that followed, the number of nations and products exploded, crushing investors and fueling bond market volatility.
A series of temporary tariff cuts have provided some relief, but uncertainty has raised concerns about inflation and a potential recession. U.S. financial markets finished higher on Monday, aided by the latest tech exemptions and a potential auto industry exemption.
The blue-chip Dow closed up 0.78%, or 312.08 points, to 40,524.79; the broad S&P 500 rose 0.79%, or 42.61 points, to 5,405.97; and the tech-heavy Nasdaq rose 0.64%, or 107.03 points, to 16,831.48.
China position on US trade: ‘We will never yield’
China has placed civilian government officials in Beijing on “wartime footing” and ordered a diplomatic charm offensive to encourage other countries to oppose Trump’s tariffs, according to Reuters, citing four sources. According to one source, Communist Party propaganda officials have played a key role in framing China’s response, and government spokespeople have posted defiant clips on social media of former leader Mao Zedong saying “we will never yield.”
Bureaucrats in the foreign affairs and commerce ministries have been ordered to cancel vacation plans and keep mobile phones turned on at all times, according to two sources. Departments responsible for the United States have also been expanded, according to officials.
“This trade war was initiated by the United States and imposed on China,” the foreign ministry said in a statement. “If the United States truly wants to resolve the issue through dialogue and negotiations, it should stop using extreme pressure. Any dialogue should be based on equality, mutual respect, and mutual benefit. Read more here.
As part of a previously scheduled visit to Vietnam on April 14, Chinese President Xi Jinping called for stronger economic ties between the two countries, claiming that they have signed dozens of new agreements despite facing severe US tariffs.
“The two sides should strengthen cooperation in production and supply chains,” Xi stated, according to a report in Vietnam’s Communist Party newspaper. Xi also encouraged closer collaboration between artificial intelligence and the green economy.
Tiny Lesotho, hit with onerous tariffs, cuts deal with Musk’s Starlink
Lesotho, the small southern African country targeted by Trump’s largest “reciprocal” tariffs, has granted Starlink, a company owned by Trump ally Elon Musk, a license to provide satellite internet services.
The Lesotho Communications Authority said the license would be valid for ten years. Civil society organizations, including SECTION 2, which advocates for domestic ownership, have condemned the decision.
Lesotho, which has a population of 2 million people and a GDP of slightly more than $2 billion, hopes to negotiate with the Trump administration about the 50% tariffs that are currently on hold for 90 days.
Billionaire Trump backer: Wait 90 days before bringing ‘hammer down’ on China
Bill Ackman, a billionaire investor and Trump supporter who is now at odds with the president over tariffs, called for a three-month pause on China on April 13. Ackman praised Trump for demonstrating “considerable flexibility” and understanding the difficulties that US businesses face in adapting to tariffs so quickly.
China is under pressure to reach an agreement, whether the tariffs go into effect immediately or in three months, Ackman said in a post on X. According to Ackman, the pause would give US businesses time to make supply chain adjustments while also allowing China to negotiate a trade deal in good faith.
“If China does not cooperate and negotiate a deal that makes sense for our country, President Trump can bring the hammer down in 90 days,” Ackman predicted.
Experts forecast little economic growth this year
Forecasters predict a bleak outlook for the US economy due to Trump’s escalating trade war, with the likelihood of a recession uncertain.
According to the average estimate of 46 economists polled by Wolters Kluwer Blue Chip Economic Indicators between April 4 and April 7, the economy will nearly stall in 2025, growing 0.8%, down from 1.7% just last month. They predicted a 47% chance of a recession, up from 25% in February.
The poll was conducted after Trump announced reciprocal tariffs on dozens of countries on April 2, but before he announced a 90-day pause on duties of up to 50% on all nations other than China on April 9, as well as exemptions for many electronics products a few days later.
A separate poll of 31 experts this week, 21 of whom responded the day Trump announced the 90-day pause, reveals a similarly bleak outlook, according to the National Association of Business Economics. They expect the economy to grow by only 0.7% this year. Read more here.
It’s not just the experts who are worried about the economy
According to a new poll released on April 13, Trump’s approval ratings for the economy and inflation have fallen following weeks of tariff policy twists and stock market turmoil.
The CBS News poll of 2,410 Americans found that 44% approved of Trump’s handling of the economy and 40% approved of his handling of inflation, both down 4% from March 30.
The president’s overall approval rating fell to 47% this month, down from 53% in February and 50% in March.
Over half of respondents (59%) rated the U.S. economy as “fairly bad” or “very bad,” with 53% believing it is worsening.