Trump Sets Stage For New Tariffs With Probe Into Pharma, Chip Imports

Amid US President Donald Trump's fresh tariff threats, the federal government in America has opened an investigation into the effects of importing certain pharmaceuticals and semiconductors on national security, a move widely seen as the prelude to initiating tariffs on prescription drugs. With the probe, the Trump Administration seeks to tariff both sectors on the grounds that extensive reliance on foreign production of medicine and chips is a national security threat, according to Federal Register filings on Monday.

The filings scheduled to be published on Wednesday set a 21-day public comment period and mark President Trump's latest use of Section 232 of the Trade Expansion Act of 1962 as justification for so-called sectoral tariffs aimed at boosting domestic production of goods he says are critical to national security.

The move indicates that the Trump administration intends to pursue the levies under authority granted by the Trade Expansion Act of 1962. Such inquiries need to be completed within 270 days after being announced.

The filings also indicate the administration began the investigations on April 1, and follow exclusions unveiled over the weekend for smartphones, computers and other electronics imported largely from China, from Trump's steep 125 per cent reciprocal duties. 

Trump officials had said those products would soon be subject to Section 232 tariffs. 

Trump's Tariffs

Trump has made use of tariffs a central plank of his administration's economic and national security policies, rolling out a series of aggressive levies against trading partners that economists estimate have lifted the average import duty to around 25 per cent from just 2.5 per cent in a matter of months.

The US began collecting baseline tariffs of 10 per cent on most American imports on April 5, and Trump on April 9 put on hold even stiffer levies aimed at goods from dozens of other trading partners, although the heftiest tariffs targeting China remain in place. Pharmaceuticals and semiconductors are exempt from those duties, but Trump has said they will face separate tariffs.

Trump said on Sunday he would be announcing tariffs on imported semiconductors over the next week, adding that there would be flexibility with some companies in the sector. The US relies heavily on chips imported from Taiwan, something former President Joe Biden sought to reverse during his term by granting billions of dollars in Chips Act awards to lure chipmakers to expand production in the United States.  

The notices published on Monday showed the investigations will include both pharmaceuticals and pharmaceutical ingredients as well as other derivative products.

Trump's tariffs have roiled financial markets, with most US stock indexes now down 10 per cent or more from record highs hit following Trump's election win in November. Waves of economists have also downgraded their outlooks for the American economy, many foretelling higher joblessness and inflation in the wake of Trump's tariffs.

A top Federal Reserve official - Governor Christopher Waller - earlier on Monday called Trump's tariff policy "one of the biggest shocks to affect the US economy in many decades."