Biden launches Chinese chips probe ahead of Trump presidency

Weeks before it leaves office, the Biden administration has announced a new trade probe under Section 301 of the Trade Act, targeting China’s production of "legacy" semiconductors. These older chips, essential to products such as automobiles, appliances, and telecommunications, may soon face significant US tariffs. The investigation reflects rising concerns about China's state-backed semiconductor industry and its potential to undermine global market competition.

US Trade Representative Katherine Tai underscored that the inquiry aims to protect American semiconductor producers and allied nations from China's aggressive, state-subsidized expansion. “China’s policies enable its companies to rapidly scale production and flood markets with underpriced chips, threatening to erode competition and destabilize global supply chains,” she said.

The announcement builds on a series of measures implemented by the outgoing Biden administration. A 50% tariff on Chinese semiconductors is set to take effect on January 1, accompanied by tighter controls on advanced artificial intelligence chips, memory chips, and semiconductor manufacturing equipment. Meanwhile, President-elect Donald Trump, taking office on January 20, has pledged even harsher trade penalties, including potential tariffs of up to 60% on Chinese imports.

Though less sophisticated than cutting-edge chips powering AI and high-performance computing, legacy semiconductors play a vital role in the manufacturing of everyday products. Commerce Secretary Gina Raimondo noted that two-thirds of US products reliant on chips depend on Chinese legacy chips, with half of US firms unaware of their origin—a troubling fact for sectors such as defense and critical infrastructure.

The investigation will also scrutinize China's growing dominance in producing silicon carbide substrates and wafers, materials integral to semiconductor fabrication. The findings could have far-reaching implications for industries reliant on these technologies.

China’s Ministry of Commerce swiftly condemned the probe, labelling it a “protectionist act” that could disrupt global supply chains and harm US businesses. Beijing has vowed to take "all necessary measures" to defend its interests.

The US, however, remains resolute in its efforts to diminish dependence on Chinese semiconductors. In response to pandemic-induced supply chain vulnerabilities, Washington allocated $52.7 billion to bolster domestic chip production, research, and workforce development under the CHIPS and Science Act.

This trade dispute underscores a bipartisan consensus on countering China’s influence in critical technology sectors. As both tariffs and regulatory measures intensify, semiconductors have become a focal point in the broader geopolitical contest between the world’s two largest economies.