USTR Report Exposes China’s Alleged Campaign to Undermine U.S. Chip Industry
U.S. Trade Representative findings drop a bombshell—accusing China of systematically targeting America's semiconductor dominance.
The Strategic Play
Forget subtle competition. The report paints a picture of coordinated efforts—not just catching up, but actively working to erode U.S. technological and industrial leadership in chips. It's a blueprint viewed through the lens of economic security, where every supply chain link becomes a potential pressure point.
Beyond Tariffs
This isn't about simple trade imbalances. The allegations suggest a multi-front approach: leveraging market access, directing strategic investment, and allegedly facilitating the transfer of sensitive technology and expertise. The goal? To reconfigure the global semiconductor landscape, with less reliance on American design and manufacturing muscle.
Silicon Sovereignty
The implications cut deep. Chips are the brains of everything from smartphones to fighter jets. Losing ground here isn't just a quarterly earnings problem—it's a long-term national security and economic competitiveness dilemma. It forces a brutal rethink of globalization's rules when foundational technologies are at stake.
The response will likely accelerate the great decoupling—more export controls, stricter investment screening, and turbocharged funding for domestic R&D and fabs. Wall Street might fret over short-term supply chain hiccups, but the real money is betting on which government's subsidy check clears first. A cynical take? It's the ultimate industrial policy showdown, where national champions are built with public cash and geopolitical muscle.
The chip war just got its official battle damage assessment. And the fight for silicon supremacy just moved from the lab and the fab to the front page.
USTR findings accuse China of undermining U.S. chip industry
The USTR report concluded that China has used non-market tactics to support its chip sector while trying to push foreign markets into dependency on its cheaper, older generation chips.
These so-called foundational or legacy semiconductors aren’t cutting-edge, but they power everything from airplanes and automobiles to telecom networks and hospital equipment.
“China’s targeting of the semiconductor industry for dominance is unreasonable and burdens or restricts U.S. commerce and thus is actionable,” the USTR wrote in the public filing.
The investigation found China’s government has created policies that allow its chip companies to flood international markets with low-cost products, creating pressure for American and European suppliers. The European Union is also dealing with Ripple effects.
In October, the Dutch government temporarily tried to seize control of Nexperia Holding BV, a chipmaker owned by China, citing national security concerns tied to the auto industry.
Despite the findings, Trump is holding off for now, trying to keep the October agreement with Xi intact.
That deal included a mutual understanding to scale back export restrictions and prevent another blow-up in tech tariffs. Still, Trump isn’t ruling out future action.
“The U.S. Trade Representative will continue to monitor the efficacy of this action, the progress made toward resolution of this matter, and the need for any additional action,” the office said.
Tariffs to target raw chip inputs, not finished goods
The potential new duties will not apply to finished products like smartphones or computers, even if they contain Chinese-made chips.
Instead, they’ll focus on Core semiconductor inputs such as diodes, transistors, raw silicon, and electronic integrated circuits that are made in China.
Any product matching the criteria laid out in the Federal Register notice and falling under HTSUS heading 9903.91.05 will still be subject to antidumping, countervailing, or other fees already in place, along with new duties if implemented.
These products are described in subdivision (f)(ii) of note 31 to subchapter III of chapter 99 of the HTSUS.
Another technical change buried in the notice will kick in on December 23, 2025. From that date forward, any qualifying Chinese-origin products brought into U.S. foreign trade zones must enter under “privileged foreign status” as defined in 19 CFR 146.41.
That change makes them subject to additional duties when formally brought into U.S. markets. Only products considered “domestic status” under 19 CFR 146.43 will avoid these extra fees.
The decision to keep tariffs on ice while keeping a loaded gun on the table gives Trump’s administration flexibility.
If relations with Xi collapse, the U.S. has the legal framework and detailed tariff structure already mapped out. The Biden-era recommendation to double chip tariffs to 50 percent by the end of 2025 under a different Section 301 case still sits in the background, unused.
Join a premium crypto trading community free for 30 days - normally $100/mo.
