Chip War Escalates: Trump and Xi Exchange Tariff Blows, Chip 4 Alliance Faces Strain

Between April 11 (Friday) and April 13 (Sunday), 2025, the United States and China each announced new semiconductor tariff measures, sending significant ripples across the tech industry. U.S. President Donald Trump has signaled that additional tariffs will be unveiled on April 14 (U.S. time), casting further uncertainty over the global semiconductor and electronics sectors.

With so many new policies and disruptions introduced, the semiconductor market is now clearly experiencing a wave of stockpiling and price increases. More notably, this has triggered a shift in the balance of power between the U.S. and China, raising concerns that even the U.S.-led “Chip 4” alliance—comprising the U.S., Japan, South Korea, and Taiwan—could face potential fractures.

The U.S.-led “Chip 4” alliance is a strategic cooperation framework involving Taiwan, South Korea, Japan, and the United States, aimed at reducing dependence on China and securing the supply of advanced technologies.

However, South Korea’s recent tilt toward closer ties with China has introduced uncertainty over the alliance’s future cohesion.

US-China Tariff Clash Intensifies, Shaking Global Electronics Supply Chain

On April 11, 2025 (Friday), the United States announced a new round of tariff measures. Under the policy, smartphones, laptops, routers, hard drives, processors, and memory products will no longer be subject to the reciprocal tariff system and will instead face a uniform 10% additional duty. The measure will be retroactively effective from April 5.

In response to the United States imposing a 145% tariff on Chinese imports, China swiftly launched retaliatory measures. A 125% tariff will be applied to U.S.-made chips manufactured at American semiconductor foundries and imported into China. However, chips produced outside the United States—including those from Taiwan, South Korea, Japan, Singapore, and the European Union—will be excluded from the new tariff regime.

The U.S. decision to exempt tariffs on smartphones, laptops, and networking equipment has provided a much-needed reprieve for major American tech companies such as Apple, Nvidia, and Dell. For Asia-based manufacturing and assembly suppliers—especially those in Taiwan—the move also represents a belated but tangible boost. Leading players like TSMC (台積電), Hon Hai (鴻海), and Quanta (廣達) are expected to see a positive response in their stock performance.

However, President Donald Trump stated on April 12 that he would announce a new round of semiconductor tariffs on April 14 (U.S. Eastern Time). Whether this move will trigger another wave of market volatility remains to be seen.

As for China’s retaliatory measures against U.S. semiconductor companies, the scope and depth of their impact are significant and merit further analysis.

Intel Takes the Hit as AMD and TSMC Gain Ground

China’s latest retaliatory measures are clearly aimed at U.S. semiconductor firms with domestic wafer fabrication facilities. Companies such as Intel, Texas Instruments, Micron and GlobalFoundries are expected to be hit the hardest. In contrast, U.S. firms that rely on outsourced production at Asian foundries—such as TSMC, Samsung, or UMC（聯電）—including AMD, Nvidia, Qualcomm, and Broadcom, have been exempted from the new tariffs.

The impact of this measure is considerable. In the CPU market, for example, Intel conducts most of its manufacturing in the United States, with some production in Ireland and Israel, and only a small portion outsourced to TSMC. As U.S.-based facilities are now subject to heavy tariffs, Intel is expected to face a significant tax burden under this policy.

In addition, China is the world’s largest market for CPU sales. Roughly 80% of global desktop and laptop computer manufacturing is concentrated in China, with much of the assembly work carried out by Taiwan’s leading electronics manufacturing firms, collectively known as the “Big Five.” As a result, the majority of Intel’s CPUs are ultimately shipped to China, making it difficult for the company to avoid the effects of Chinese trade policies.

Taiwan’s leading electronic manufacturing service (EMS) providers—collectively known as the “Five Taiwanese Giants”—include Foxconn (鴻海), Quanta (廣達), Pegatron (和碩), Compal (仁寶), and Inventec (英業達). These companies hold a globally competitive position in notebook and AI server production, and will be directly affected by the latest tariff measures.

As for AMD, a key competitor in the CPU market, the company no longer owns any semiconductor fabs and instead relies entirely on outsourcing, primarily to TSMC and similar foundries. This fabless model may give AMD a competitive edge in the Chinese market, and it is highly likely that the company will erode Intel’s market share in the region.

Texas Instruments, which specializes in analog chips and power ICs, maintains most of its production capacity in the United States and is therefore also facing tariff-related pressures.

Micron Technology, which focuses on memory products, maintains production facilities not only in the United States but also in Taiwan and Japan. GlobalFoundries operates manufacturing plants in the U.S. as well as in Singapore and Germany. Since both companies derive a significant portion of their production from U.S.-based operations, they are expected to face mounting pressure from China’s high-tariff policies.

For China, tariff policies are not solely about punishing U.S. companies; they also reflect a strategic effort to mitigate the risk of future supply disruptions. In the case of power chips produced by Texas Instruments, China already has a growing number of domestic power IC suppliers capable of gradually replacing foreign firms and establishing a self-sufficient supply chain. This capability provides China with the confidence to impose high tariffs on Texas Instruments.

Regarding GlobalFoundries’ mature-node foundry business, China already has domestic players such as SMIC that can serve as viable alternatives. As a result, even if China imposes tariff sanctions on GlobalFoundries, the overall stability of chip supply is unlikely to be affected.

The memory sector warrants particular attention. China already possesses a notable level of memory production capacity, and Samsung Electronics, currently facing a slowdown in business growth, has recently begun to renew its investment in the Chinese market.

In late March, Samsung Electronics Chairman I Jae-yong（이재용） visited Beijing to attend the China Development Forum（中國發展高層論壇, CDF）and met with Chinese President Xi Jinping（習近平）. This event signaled that Samsung, currently facing growth challenges, is indeed planning to reinvigorate its strategic expansion in the Chinese market.

China not only secured a supply commitment from Samsung Electronics, but also received an agreement for Samsung to provide more high-bandwidth memory (HBM) to the Chinese market. This ensures that China can continue advancing its AI system development. As a result, Beijing feels more confident in imposing high tariffs on Micron, believing that the risk of a memory supply disruption is minimal.

Is South Korea Tilting Toward China? Chip 4 Alliance Faces a Potential Crack

One key development to watch is South Korea’s political trajectory. For years, the country has maintained a delicate balance between the two superpowers, the U.S. and China, with domestic factions evenly split between pro-U.S. and pro-China views. However, with pro-American President Yun Seok-yeol（윤석열）impeached and removed from office, the upcoming presidential election on June 3 sees pro-China opposition leader I Jae-myeong（이재명）leading in the polls. This suggests that South Korea may be increasingly tilting toward China.

Against this backdrop, Samsung Electronics—long known for its acute political sensitivity—acted even before a new president was elected. Chairman I Jae-yong had already traveled to Beijing to meet with Chinese President Xi Jinping. It is foreseeable that South Korea’s semiconductor industry, led by Samsung, will move proactively to strengthen its cooperation and alignment with the Chinese market.

The United States appears fully aware of South Korea’s recent political moves. Going forward, the U.S.-led Chip 4 alliance—comprising the United States, Japan, South Korea, and Taiwan—may face emerging fractures. How Washington manages to retain South Korea’s commitment will be a key indicator to watch.

A senior executive in the electronics industry privately remarked that, compared to President Trump’s blanket tariff policy that made little distinction between allies and adversaries, Chinese President Xi Jinping’s retaliatory measures appear more targeted. They focus on penalizing American companies while sparing third-party nations, suggesting greater consideration for partners and allies. The executive further noted that as U.S. pressure intensifies, Beijing is keen to expand its network of allies—a strategy that reflects Xi’s diplomatic emphasis on harmony and winning broader support.

President Trump’s recent move to exempt smartphones, laptops, and related products from tariffs can be seen as a goodwill gesture—an initial positive signal to allies such as Taiwan, Japan, and South Korea. However, U.S. Commerce Secretary Lutnik, known for his hardline stance, reiterated on April 13 that the exemption is “only a temporary measure.” He previewed that the upcoming policy announcement on April 14 will likely reinstate semiconductor tariffs on these devices, which could take effect within one to two months.

President Trump’s tariff policies have proven highly volatile, with frequent revisions that often reverse previous plans. As Washington prepares to announce a new round of semiconductor tariffs on April 14, it remains to be seen whether this move will trigger another wave of market turbulence.

However, some Taiwanese firms have pointed out that China still holds other countermeasures at its disposal. For instance, if Beijing were to impose a 40% to 50% tariff on exports such as smartphones, laptops, and ICT products—items that the U.S. heavily relies on China to produce—it would undoubtedly deal another significant blow to American companies.

With the U.S. and China each announcing new rounds of tariffs and countermeasures, the global semiconductor market is now experiencing significant volatility and heightened uncertainty.

In fact, the global semiconductor market saw a notable wave of stockpiling and price hikes last week. According to a Taiwanese distributor of semiconductor components, the surge in demand was driven partly by the 90-day tariff grace period announced by the Trump administration, which prompted the market to build up inventory. At the same time, continued strong demand for AI applications has further fueled the real consumption of semiconductor parts.

The distributor further noted that a U.S.-based client called last week, urging Taiwanese suppliers to expedite shipments, while also demanding that the Taiwanese side absorb the 10% tariff. In response, the suppliers not only refused outright but also took the opportunity to raise prices. Given the current supply shortage and the escalating tariff barriers from both the U.S. and China, the wave of panic buying in the semiconductor market is likely to persist.

Last week, I attended a seminar jointly organized by Taiwan’s media company TVBS and the Council on Foreign Relations (CFR). The topic was “U.S. Regulation vs. Global Governance: Is There an Underground Empire in Finance and Information Networks?” The event featured four scholars—Huang Kuei-bo（黄奎博）, Hu Yi-tien（胡一天）, Su Yi-hao（蘇翊豪）, and Kao Ta-yu（高大宇）—who engaged in an in-depth discussion on how the United States weaponizes the global economic system and how Taiwan should respond to the ongoing U.S.-China tariff and semiconductor wars.

Kao Ta-yu, an adjunct professor in the Cybersecurity Master’s Program at Taiwan’s National Chengchi University, remarked that as the U.S. and China engage in increasingly fierce competition in the semiconductor and high-tech sectors, relevant nations and companies should respond cautiously and avoid getting entangled in the conflict. Using a colloquial metaphor, he said, “When the big brothers fight, the little brother should stay quiet.” Even TSMC, the global leader in semiconductor foundry services, should refrain from standing out too much amid the U.S.-China standoff and instead focus on pragmatic, steady survival strategies.

Kao Ta-yu further noted that the United States maintains an “underground hegemony” through its institutional and financial advantages, while China has built an “authoritarian hegemony” via centralized political control. In contrast, Taiwan’s best strategy for survival in the semiconductor industry lies in cultivating a “professional hegemony” by deepening its strengths in research and technological leadership.

I find this perspective to be highly insightful. As the rivalry between the United States and China intensifies, both powers are likely to step up efforts to court influential partners. For Taiwan, the most viable path lies in consistently strengthening its “professional hegemony” in technology, allowing it to remain a neutral and valuable partner to both camps—and to better shield itself from direct geopolitical shocks.