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Any parent knows there is a fine line between supporting a child and smothering a child. Parents want the best for their children, and are usually willing to sacrifice for it. That can mean investing in education and training. It can mean taking an active role in activities. It can mean spending time and energy to make sure the child has opportunities to make lots of money.
However, it is possible to do too much and go too far. At some point the parent has done enough, and it is up to the child to succeed.
That's where the country finds itself with semiconductors. The industry has needed some help in recent years, as foreign competitors drove American producers out of the country. Wisely, the government has invested in rebuilding semiconductor supply chains.
However, it also needs to give the industry time to grow on its own. A carefully calibrated approach can strengthen domestic manufacturing while ensuring American companies, workers and the military-industrial base continue to have access to the semiconductor inputs they need.
Since the COVID lockdowns, Americans have learned that there are many things we need to make at home. That includes crucial medical equipment (both high-tech and low-tech) and computer components such as semiconductors.
A key reason is that computing is the cornerstone of modern military systems, which rely on semiconductors at every level. The United States has long been a leader in missile systems, satellites, radar, cybersecurity infrastructure, and other AI-enabled capabilities. AI is the nuclear arms race of the 2020s; if our AI is stronger than that of potential cyber-attackers, then we win.
To maintain those advantages, we must avoid the supply chain disruptions that delay or increase the cost of these components and could ultimately slow procurement and increase costs.
When it comes to high-tech, the United States has taken positive steps. "The administration is modernizing international trade rules for an economy driven by data, software, cloud computing and AI. If this effort succeeds, it may become the administration's most lasting and beneficial trade achievement," wrote Karan Bhatia, Google's global head of government affairs and public policy in The Wall Street Journal. "The trade rules governing data, AI and digital commerce will help determine who leads the world's economy in coming decades."
What is true of data is also true of hardware such as semiconductors. The administration has used tariffs to shelter and nurture the industry and protect supply chains. As we look at the months and years ahead, trade policy needs to strengthen the companies that already lead the American innovation economy. That also means giving them time to thrive and grow before we change course and possibly impose more tariffs.
As we've seen in other areas such as agriculture, the United States cannot maintain its technological and production advantages if critical inputs become unnecessarily more expensive or difficult to obtain. You can't grow crops without fertilizer or manufacture an F-35 without semiconductors.
Yet this year, the Trump administration imposed tariffs on some semiconductor imports using Section 232 of the Trade Expansion Act. These tariffs would raise prices and make it more difficult for producers to access semiconductors. The Innovation Technology and Innovation Foundation estimates that these tariffs could "reduce U.S. GDP per capita by $170 in the first year and by a cumulative total of $4,825 by the 10th year if the tariffs were sustained for that long."
Instead of boosting tariffs, ITIF recommends that the administration remove existing blanket tariffs on semiconductors, while "Congress should extend the 35 percent investment tax credit at least through 2030 to incentivize domestic semiconductor manufacturing."
The United States cannot achieve and maintain its AI/technology leadership if tariffs constrain access to key materials. Much like with a parents' love for children, tariffs need to be targeted, not overdone. The industry is protected and ready to grow but is in danger of being smothered if tariffs get overwhelming. The right tariff policy is to go slowly and build up domestic industry.
Jared Whitley is a longtime politico who has worked in the U.S. Senate, White House, and defense industry. In 2024, he won the Top of the Rockies Best Columnist award. He wrote this for InsideSources.com.