Washington, Aug 7 (AP) President Donald Trump said on Wednesday that he will impose a 100 per cent tariff on computer chips, raising the spectre of higher prices for electronics, autos, household appliances and other essential products dependent on the processors powering the digital age.

"We will be putting a tariff of approximately 100 per cent on chips and semiconductors," Trump said in the Oval Office while meeting with Apple CEO Tim Cook. "But if you are building in the United States of America, there is no charge." The announcement came more than three months after Trump temporarily exempted most electronics from his administration's most onerous tariffs.

The Republican president said companies that make computer chips in the US would be spared the import tax. During the COVID-19 pandemic, a shortage of computer chips increased the price of autos and contributed to higher inflation.

Investors seemed to interpret the potential tariff exemptions as a positive for Apple and other major tech companies that have been making huge financial commitments to manufacture more chips and other components in the US.

Big Tech already has made collective commitments to invest about USD 1.5 trillion in the US since Trump moved back into the White House in January. That figure includes a USD 600 billion promise from Apple after the iPhone maker boosted its commitment by tacking another USD 100 billion on to a previous commitment made in February.

Now the question is whether the deal brokered between Cook and Trump will be enough to insulate the millions of iPhones made in China and India from the tariffs that the administration has already imposed and reduce the pressure on the company to raise prices on the new models expected to be unveiled next month.

Wall Street certainly seems to think so. After Apple's stock price gained 5 per cent in Wednesday regular trading sessions, the shares rose by another 3 per cent in extended trading after Trump announced some tech companies will not be hit with the latest tariffs while Cook stood alongside him.

The shares of AI chipmaker Nvidia, which also has recently made big commitments to the US, rose slightly in extended trading to add to the USD 1 trillion gain in market value the Silicon Valley company has made since the start of Trump's second administration.

The stock price of computer chip pioneer Intel, which has fallen on hard times, also climbed in extended trading.

Inquiries sent to chip makers Nvidia and Intel were not immediately answered. The chip industry's main trade group, the Semiconductor Industry Association, declined to comment on Trump's latest tariffs.

Demand for computer chips has been climbing worldwide, with sales increasing 19.6 per cent in the year-ended in June, according to the World Semiconductor Trade Statistics organisation.

Trump's tariff threats mark a significant break from existing plans to revive computer chip production in the US that were drawn up during the administration of President Joe Biden.

Since taking over from Biden, Trump has been deploying tariffs to incentivise more domestic production. Essentially, the president is betting that the threat of dramatically-higher chip costs would force most companies to open factories domestically, despite the risk that tariffs could squeeze corporate profits and push up prices for mobile phones, TVs and refrigerators.

By contrast, the bipartisan CHIPS and Science Act that Biden signed into law in 2022 provided more than USD 50 billion to support new computer chip plants, fund research and train workers for the industry. The mix of funding support, tax credits and other financial incentives were meant to draw in private investment, a strategy that Trump has vocally opposed. (AP) RC

Tariff on computer chips with exemption for US-built production aims to incentivize onshoring of manufacturing. A presidential trade directive would impose a 100 percent tariff on imported computer chips and semiconductors, with an exemption for chips manufactured in the United States, using import taxation to incentivize onshoring of production and alter the balance between tariff-based leverage and subsidy-led industrial policy.