The Urgent Fight to Reclaim Industrial Independence Before It’s Too Late
WASHINGTON, D.C. — The Coalition for a Prosperous America (CPA) today released a landmark economics report by its economics team detailing how decades of offshoring have eroded America’s once-dominant semiconductor manufacturing base. The report, titled “America’s Chip-for-Chip Tariff Policy: The Urgent Fight to Reclaim Industrial Independence Before It’s Too Late,” finds that the United States now produces only 10 percent of the world’s chips—and almost none of the most advanced ones—while China has captured the majority of global capacity for legacy chips, the mature semiconductors essential to cars, medical devices, and industrial equipment.
As a result, America has become dangerously dependent on foreign supply chains for its most critical technology. Yet, according to CPA’s analysis, this dependence is understated by as much as 14 percentage points because official trade data fail to count the vast number of chips imported indirectly inside finished products such as vehicles, smartphones, and industrial electronics. When those hidden chip imports are included, U.S. import dependence rises from 69% to 83%, underscoring how deeply America’s chip demand is met through offshore production rather than domestic manufacturing.
In the coming weeks, the Trump administration is expected to announce the results of its Section 232 investigation into semiconductor imports, as well as its broader Chip-for-Chip tariff strategy. CPA’s economic analysis of the Chip-for-Chip policy—which imposes tariffs on imported chips and finished goods while granting temporary import credits for verified U.S. semiconductor investments—finds it could redirect nearly $400 billion in total economic activity back to the United States over five years. CPA economists estimate the policy would generate $230 billion in tariff revenue and catalyze $153 billion in private-sector semiconductor investment, transforming America’s position in the global semiconductor market.
“This report lays out the economic blueprint for how America can once again control its own industrial future,” said Jon Toomey, President of CPA. “The Trump administration’s Chip-for-Chip tariff strategy is not just good trade policy—it’s essential national security policy. It ensures that the U.S. can make the chips it needs, power the technologies that define the future, and never again rely on adversarial nations like China to keep our economy running. Secretary Lutnick is exactly right that America must seize this moment to rebuild domestic production, put our existing fabs back to work, and guarantee that new ones never sit idle.”
U.S. Commerce Secretary Howard Lutnick has emerged as a leading figure in the Trump administration working to reshore the semiconductor industry and address this clear national security risk. CPA’s report highlights that the proximity of Taiwan to mainland China—both geographic and political—is an existential risk. Today’s most advanced chips in the world are manufactured in a region Beijing has openly threatened to seize, and if China acts on that threat, the United States could lose access overnight to the technological lifeblood of its economy, military, and society.
“My objective, and this administration’s objective, is to get chip manufacturing significantly onshored — we need to make our own chips.” [Ensuring America can] “do what we need to do, if we need to do it.” — U.S. Commerce Secretary Howard Lutnick to NewsNation
KEY POINTS
- Official trade data underestimates America’s true chip dependence: When hidden chip imports (most U.S. chip imports arrive embedded in finished products) are included, U.S. import dependence rises from 69% to 83%.
- The Chip-for-Chip Tariff Strategy Would Rebuild U.S. Industrial Capacity: CPA estimates the policy could generate $230 billion in tariff revenue and catalyze $153 billion in private-sector semiconductor investment over five years.
- Without Demand Incentives, U.S. Fabs Risk Remaining Underutilized: The Chip-for-Chip plan complements ‘CHIPS Act’ investments by guaranteeing domestic demand for U.S.-made semiconductors and closing loopholes allowing foreign-made chips to enter in imported finished goods.
CPA’s analysis also highlights a critical vulnerability in the U.S. chip supply chain: while attention has focused on advanced semiconductors, China is rapidly expanding its dominance in legacy chips—the mature semiconductors that power vehicles, appliances, defense systems, and medical equipment. According to the report, China’s share of global legacy chip production is projected to exceed 25% by 2025, posing a direct risk to the U.S. defense industrial base and broader economy. As CPA’s 2023 Cash Over Country report exposed, American companies have poured billions into China’s state-backed legacy semiconductor sector, effectively financing their own competition.
To close these vulnerabilities, CPA calls for a dual-track enforcement mechanism. This approach ensures multinational companies cannot bypass tariffs by offshoring assembly operations and importing fully assembled goods back into the U.S. market.
- Section 232 tariffs on the chip value inside imported goods.
- IEEPA tariffs on the non-chip value of finished products—such as smartphones, laptops, and vehicles—that use foreign-made semiconductors.
The report also underscores the urgency of creating domestic demand for U.S.-made chips. Despite CHIPS Act investments, many existing American fabs are running under capacity due to a lack of steady domestic purchasing from major technology and automotive companies. The Chip-for-Chip plan would change that by requiring major buyers—including Apple, Dell, HP, and General Motors—to source a growing share of their chips from U.S. facilities or face steep tariffs.
CPA’s findings come amid an escalating economic confrontation with China. Beijing’s newly announced rare earth export controls—requiring global approval for any product containing Chinese-processed materials—have made clear that China intends to extend its control over global supply chains. The report warns that China’s rare earth policy represents an attempt to “exercise extraterritorial authority over the global economy”, turning global production networks into instruments of political leverage.
CPA’s report also calls for a regulatory fast-track program for semiconductor projects to accelerate construction timelines, cut permitting delays, and reduce costs for strategic investments. Building a semiconductor fab in the United States still takes nearly twice as long as in Taiwan or South Korea due to regulatory hurdles. Streamlining these processes, combined with tariffs and corporate accountability measures, would ensure the U.S. has both the capacity and demand to sustain its semiconductor industry.
For this policy to succeed, implementation must be airtight—no loopholes, no exemptions, and no room for multinational corporations to hide behind nebulous promises. Accountability measures must be non-negotiable. A Chip-for-Chip tariff framework will only work if it ensures real domestic demand for U.S.-made chips. CPA’s report calls for strict rules for companies pledging to build U.S. fabs:
- Temporary Import Credits: Companies can import chips duty-free only while their U.S. expansion projects are on track and under construction.
- Binding Investment Pledges: Import credits should correspond precisely to the scale and pace of their American manufacturing buildouts.
- Clawback Provisions: If a company fails to fulfill its investment pledge, it must pay back every dollar of avoided tariffs—with interest.
- Domestic Purchasing Incentive: Top semiconductor buyers like Apple, Samsung, Lenovo, Dell, HP, and Sony will be motivated to source from U.S. fabs first and commit to purchases from future capacity, in order to receive chip for chip import credits as that capacity is being built.
ABOUT THE REPORT
“America’s Chip-for-Chip Tariff Policy: The Urgent Fight to Reclaim Industrial Independence Before It’s Too Late” provides an integrated economic, industrial, and national security analysis of the Trump administration’s forthcoming semiconductor tariff initiative. The report models the expected fiscal impact of 100% tariffs on imported chips exceeding U.S. production commitments, alongside temporary import credits tied to verified domestic investments.
Download the full report: Click here to read America’s Chip-for-Chip Tariff Policy: The Urgent Fight to Reclaim Industrial Independence Before It’s Too Late.
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