January brought several significant, long-awaited developments in the U.S. semiconductor policy space, marking an inflection point in how the Administration is deploying trade tools to advance national security and industrial policy objectives.
On January 14, 2026, the White House issued Presidential Proclamation 11002 (the “Proclamation”) and an accompanying Fact Sheet adopting certain measures in response to the investigation under Section 232 of the Trade Expansion Act of 1962 (“Section 232”) into the national security effects of imports of semiconductors, semiconductor manufacturing equipment, and their derivative products. The Proclamation imposed a 25% tariff on a narrow set of advanced logic semiconductors, effective January 15, 2026.
These tariffs, together with a separate Final Rule issued by the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”), appear to operationalize the Trump Administration’s arrangement announced in December to allow the sale of Nvidia’s H200 (and equivalent) chips to China in exchange for the U.S. government receiving “25% of the revenue.” See here for Covington’s separate Client Alert on the BIS Final Rule.
Notably, beyond these narrow tariffs, the Proclamation stops short of imposing broad-based semiconductor tariffs. Instead, it directs the Secretary of Commerce and U.S. Trade Representative to engage foreign jurisdictions on potential arrangements to strengthen the U.S. semiconductor industry. This restraint mirrors the Administration’s December decision to delay for 18 months the imposition of any tariffs on Chinese semiconductors and related products under a separate investigation pursuant to Section 301 of the Trade Act of 1974 (“Section 301”).
The following day, on January 15, 2026, the United States and Taiwan announced a trade deal focused on reshoring semiconductor manufacturing to the United States and strengthening domestic supply chains—further reinforcing the Administration’s emphasis on building production capacity and resilience rather than imposing near-term across-the-board trade restrictions.
Taken together, these actions offer important insight into the Administration’s strategic priorities in semiconductor policy, signaling a focus on domestic production, supply chain resilience, and technological competitiveness. The combination of the Taiwan deal, BIS Final Rule, and Section 232 and 301 actions reflects a coordinated approach to incentivizing domestic production while managing international trade relationships.
At the same time, the Administration appears to be carefully balancing the use of trade tools with ongoing negotiations to avoid escalating tensions with China ahead of the planned April meeting between Presidents Trump and Xi. For businesses in the semiconductor sector and the wide range of consuming industries, these developments suggest that, although immediate escalatory measures have been limited, the Administration is keeping its options open to impose broader tariffs in the sector as negotiations and reporting processes unfold.
I. Section 232 Actions on Semiconductors
New 25% Tariffs Applied to Narrow Scope of Advanced Semiconductors and Derivatives
According to the Annex to the Proclamation, unless an exemption applies (as discussed below), semiconductors are subject to the additional 25% tariff if the following criteria are met:
- They are classifiable under the U.S. Harmonized Tariff Schedule (“HTSUS”) subheadings 8471.50, 8471.80, and 8473.30, which apply only to certain automatic data processing machines and their parts; and
- They are (or contain) logic integrated circuits with:
a. a total processing performance (“TPP”) greater than 14,000 and less than 17,500, and a total DRAM bandwidth greater than 4,500 GB/s and less than 5,000 GB/s; or
b.a TPP greater than 20,800 and less than 21,100, and a total DRAM bandwidth greater than 5,800 GB/s and less than 6,200 GB/s.
These technical parameters appear to describe high-performance semiconductors with artificial intelligence applications, which comprise a small portion of the overall semiconductor market by volume. The accompanying Fact Sheet states that the technical parameters specifically include the Nvidia H200 and AMD MI325X chips.
The Proclamation also provides for certain use-based exemptions from the additional 25% duties. Specifically, the duties will not apply if the covered products are imported:
- for use in U.S. data centers;
- for repairs or replacements performed in the United States;
- for research and development in the United States involving subject semiconductors;
- for use by startups in the United States;
- for non-data center consumer applications in the United States, including gaming, personal computing, professional visualization, workstation applications, and automotive applications;
- for use in non-data center civil industrial applications in the United States, including factory robotics and industrial machinery;
- for use in United States public sector applications; or
- for other uses that the Secretary determines contribute to the strengthening of the United States technology supply chain or domestic manufacturing capacity for derivatives of semiconductors.
U.S. Customs and Border Protection (“CBP”) has not released guidance regarding what importers will need to do to support claims of eligibility for use-based exemptions. In administering other tariffs where end use determines whether a product is subject to tariffs, CBP has sometimes required end-use certificates from importers. At a minimum, importers claiming these exemptions may be expected to have records documenting the ultimate use of their products.
A few additional features of note from the Proclamation include the following:
- Those semiconductor products subject to the additional 25% tariff will be excluded from any other Section 232 tariffs and from the reciprocal and border-security tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”).
- On the other hand, those semiconductors subject to the additional 25% tariff will continue to be subject to most-favored-nation (“MFN”) tariffs, any applicable antidumping or countervailing duties, and Section 301 tariffs.
- The Proclamation makes it clear that “[n]o drawback shall be available” for the additional 25% tariff.
For more information on these new tariffs, including reporting instructions, see this additional guidance released by CBP.
No Immediate Restrictions on Semiconductor Manufacturing Equipment
Although the Section 232 investigation covered all imports of semiconductors, semiconductor manufacturing equipment, and their derivative products—and the Secretary of Commerce found that imports in all three categories threaten U.S. national security—the Proclamation imposes no tariffs or other restrictions on the vast majority of investigated products.
Notably, the Proclamation does not impose immediate tariffs on semiconductor manufacturing equipment, despite U.S. manufacturers’ heavy reliance on foreign suppliers. As discussed below, however, the Proclamation signals that “significant,” broader tariffs on semiconductors and related products, including manufacturing equipment, may be imposed in the future.
Directive to Launch Negotiations
In addition to imposing 25% tariffs on certain advanced logic chips, the Proclamation orders the Secretary of Commerce and U.S. Trade Representative to pursue or continue pursuing negotiations to address the national security threat with respect to imported semiconductors, semiconductor manufacturing equipment, and their derivative products. Read in light of the underlying report’s emphasis on reducing U.S. reliance on foreign supply, these negotiations appear intended to use Section 232 leverage, including threats of more expansive tariffs in the future, to secure commitments that strengthen U.S.-based semiconductor capacity, align partner policies with U.S. industrial priorities, and reshape supply chains viewed as vulnerable.
The Administration’s approach is consistent with its prior use of Section 232 as a negotiating tool, not an immediate trigger for broad tariffs. During the first Trump Administration, a Section 232 investigation into automobiles resulted initially in a directive to negotiate, with tariffs imposed only years later based on that same investigation. A similar dynamic may be at play here: the directive to negotiate allows the Administration to defer potentially disruptive action—particularly with respect to allies and partners who are critical to the global semiconductor ecosystem, and with whom trade relations have only recently begun to stabilize amid ongoing negotiations in the shadow of the IEEPA tariffs—while preserving the option to impose broad tariffs in the future. At the same time, the negotiations may provide a vehicle to build on investment commitments by these partners, channeling them toward expanded semiconductor and semiconductor-related manufacturing in the United States, consistent with the Administration’s recent use of Section 232 in pharmaceuticals and other sectors.
Potential for “Significant” Tariffs in the Future
The Proclamation directs the Secretary of Commerce and U.S. Trade Representative to provide an update to the President on the state of negotiations within 90 days. The Proclamation further states that, depending on the status or result of these negotiations, the President may consider imposing “significant” tariffs on semiconductors, semiconductor manufacturing equipment, and their derivative products, along with an accompanying tariff offset program to provide preferential treatment to companies investing in U.S. semiconductor production and the U.S. semiconductor supply chain.
The Proclamation also directs the Secretary of Commerce to provide the President with an update on the market for semiconductors used in U.S. data centers by July 1, 2026, so that the President can determine whether to modify the tariffs imposed under the Proclamation.
This language clearly signals that additional tariff actions on semiconductors and related products remain very much a possibility, not only after July 1, 2026, but also in the near term, including within 90 days from January 14. Given the investigation’s broad findings regarding insufficient U.S. manufacturing capacity across a wide range of semiconductor products, additional tariffs—or at least explicit tariff threats—are likely to be used as leverage to obtain concrete commitments to expand manufacturing in the United States.
Subsequent to the publication of the Proclamation, U.S. Secretary of Commerce Howard Lutnick publicly stated that South Korean and Taiwanese semiconductor companies that do not invest in the United States may face tariffs of up to 100% unless they commit to increase U.S. production capacity. It is possible that the 100% tariffs referenced by Secretary Lutnick are those future “significant” tariffs anticipated in the Proclamation.
II. Relationship to the BIS Final Rule
On December 8, 2025, President Trump announced that he would authorize Nvidia to sell its H200 artificial intelligence chip in China in exchange for the U.S. government taking “25% of the revenue,” and that the same approach would also apply to other U.S. companies. This announcement raised potential legal concerns, as the Export Control Reform Act of 2018 prohibits export licensing fees, in part due to the U.S. Constitution’s prohibition on export taxes. Accordingly, the Administration has sought a vehicle that is not a license fee but that enables it to be “paid” in exchange for authorizing the export to China of H200 and equivalent semiconductors. The tariffs imposed under the Proclamation, in conjunction with the Final Rule issued by BIS on January 15, 2026, appear to be the Administration’s solution.
The BIS Final Rule revises U.S. licensing policy from a presumption of denial to a case-by-case review for exports from the United States to China and Macau of certain advanced semiconductors and related commodities—specifically, those commodities classified for U.S. export control purposes under Export Classification Control Numbers 3A090.a, 4A090.a, or related “.z.a” entities with a TPP less than 21,000, and a total DRAM bandwidth less than 6,500 GB/s, which the Final Rule states includes the Nvidia H200 and AMD MI325X semiconductors.
Notably, the relaxation of U.S. licensing policy for these advanced chips is subject to certain conditions, including that the item undergoes independent, third-party testing in the customs territory of the United States to verify its performance specifications. Accordingly, any semiconductor product potentially eligible to be shipped to China will need to first be imported into the United States for testing, upon which it will be subject to the 25% Section 232 tariffs imposed by the Proclamation. In this way, the U.S. government will be “paid” a 25% tariff for all H200 and equivalent chips that are ultimately exported to China. On the other hand, those semiconductors not intended for reexport to China can presumably fall within the broad tariff exemptions for products imported to support the buildout of the U.S. technology supply chain.
The Proclamation does not on its face exclude the application of Chapter 98 of the HTSUS, including potentially Temporary Importation under Bond (“TIB”). Goods that are eligible for and entered under TIB do not pay customs duties, on the condition that the goods are exported or destroyed within a time limit. In particular, HTSUS 9813.00.30 specifically allows TIB entry for “articles intended solely for testing experimental, or review purposes[.]” In the absence of further guidance from CBP, the Proclamation does not appear to foreclose an interpretation that semiconductors imported into the United States solely for the purposes of undergoing third-party testing necessary for subsequent export to China could avoid paying the 25% Section 232 tariff by claiming TIB status. Accordingly, it would not be a surprise to see further guidance from the Administration clarifying that TIB entry is not available for H200 and equivalent chips imported solely for third-party testing, or perhaps limiting TIB entry to chips destined for export to markets other than China.
III. US-Taiwan Trade Deal
Also relevant to the Section 232 semiconductors announcement is the subsequent announcement of the semiconductor-related components of the U.S.-Taiwan trade deal. According to the Department of Commerce Fact Sheet, Taiwan committed to substantial semiconductor-related investment in the United States, including at least $250 billion in new direct investments by Taiwanese semiconductor and technology companies to build and expand advanced semiconductor, energy, and artificial intelligence production and innovation capacity, as well as at least $250 billion in credit guarantees to support additional investment across the full semiconductor supply chain. The agreement also contemplates the development of world-class industrial clusters in the United States aimed at positioning the U.S. as a global hub for next-generation manufacturing and innovation.
The deal explicitly links these investment commitments to preferential treatment on future Section 232 tariffs. According to the Fact Sheet, “[f]uture Section 232 duties applied to Taiwanese semiconductors will reward Taiwanese semiconductor producers that invest in the United States.” In particular:
- “Taiwanese companies building new U.S. semiconductor capacity may import up to 2.5 times that planned capacity without paying Section 232 duties during the approved construction period, with a lower preferential Section 232 rate for above-quota imports.”
- “Taiwanese companies who have completed new chip production projects in the United States will still be able to import 1.5 times their new U.S. production capacity without paying Section 232 duties.”
Overall, by embedding tariff relief for Taiwanese chipmakers into the investment framework in advance of broader Section 232 action, the Administration appears to be signaling that additional, broader tariffs are not merely hypothetical but rather an expected near-term pressure point to drive concrete manufacturing commitments in the United States.
IV. Significance for U.S. Trading Partners
Reactions from China
The Chinese government has previously displayed caution concerning the importation of U.S.-origin advanced semiconductors into China. In mid-January, news reports indicated that Chinese customs authorities had informed personnel that Nvidia’s H200 chips were not allowed to enter China, with potential exceptions in special circumstances such as research and development conducted in partnerships at universities. A Chinese policy restricting purchases of these advanced chips would limit the applicability of BIS’s Final Rule, and therefore reduce the volume of semiconductors imported into the United States for testing that would be subject to the new duties. Subsequent reports indicated that China has since begun issuing conditional approvals for purchases by leading Chinese AI and technology companies, while the applicable regulatory conditions continue to be finalized. The extent to which China may limit approved volumes, and the conditions that ultimately will apply, remain to be seen.
Implications for Korea, Japan, and the EU
The terms of the U.S.-Taiwan trade deal add further uncertainty to an already complicated set of U.S. commitments to several trading partners concerning preferential rates and MFN treatment under eventual Section 232 semiconductor tariffs.
For instance, a Fact Sheet clarifying the U.S. agreement with South Korea stated that it intends to impose Section 232 tariffs on South Korean semiconductors and related products at a rate “no less favorable than terms that may be offered in a future agreement covering a volume of semiconductor trade at least as large as Korea’s[.]” While not specified, it has been reported that references to “a future agreement covering a volume of semiconductor trade at least as large as Korea’s” is in reference to the-then forthcoming deal with Taiwan. Accordingly, South Korea’s preferential rate should be as low as the as-yet-unspecified “preferential” rate afforded to Taiwanese chipmakers in the U.S.-Taiwan trade deal. However, unlike the Taiwan deal, Korea’s agreement with the United States does not explicitly tie MFN treatment on semiconductor tariffs to company-specific investments in U.S. manufacturing capacity—rather, it contains only general commitments for South Korea to invest in the United States. The contents of the Taiwan deal may thus raise questions for Korean chipmakers as to whether they too may now be expected to make substantial manufacturing investments in the United States to secure the competitive tariff treatments afforded under South Korea’s agreement with the United States.
In contrast, the Joint Statement detailing the U.S. agreement with the EU states that the U.S. will ensure that, for any goods subject to future Section 232 tariffs on semiconductors, the tariff rate comprised of the MFN tariff and the tariff imposed pursuant to Section 232 will be capped at 15%. A Joint Statement clarifying the U.S. agreement with Japan stated that for any future Section 232 tariffs on semiconductors, “the United States intends to apply to goods of Japan a Section 232 tariff rate no greater than that applied to goods of any other country.” Unlike the South Korea agreement, the Japan agreement does not appear to have tied MFN treatment to any specific U.S. trade deal with another trading partner, which makes it likely that the 15% cap in the U.S.-EU agreement will apply unless any other partners secure a lower rate in the future.
While these terms will require further clarification, and potentially further negotiation, they facially appear to lead to the following results for eventual Section 232 tariffs on semiconductors and related products:
- The EU rate will be capped at 15%;
- The Japan rate will be on MFN terms, i.e., no higher than 15% as a result of the EU deal, but potentially lower if any other partners receive rates lower than 15%;
- The Taiwan rate will be “preferential” up to a certain volume and conditioned on investment in U.S. manufacturing capacity; and
- The South Korea rate will be on MFN terms with countries that have semiconductor trade with the U.S. of equal or greater size, which would appear to include at least Taiwan.