On December 23, President Donald Trump’s administration formally approved a delay to planned U.S. semiconductor tariffs on China, pushing their implementation to 2027. While a U.S. government investigation concluded that China’s dominance in the semiconductor industry has negatively affected the U.S. and supported potential trade action, the U.S. government has recently declined to undertake certain measures targeting China to avoid raising tensions amid ongoing trade negotiations.
Under the newly implemented policy framework, semiconductor tariffs on China are set to increase by an unspecified amount in June 2027, leaving significant room for adjustments as trade negotiations evolve.
Separately, global semiconductor tariffs under a different government investigation remain under consideration, although it is unclear how such measures could be implemented without further straining relations with China.
Separately, on January 14, the U.S. enacted a 25% tariff on imports of certain advanced artificial intelligence chips, including the Nvidia Corporation H200 chip, the AMD MI325X chip, and other chip technologies of similar caliber. The measure is intended to support U.S. chip manufacturing and deter reliance on AI chip imports. The new tariff went into effect immediately.
Political tensions between China and Japan over Taiwan lead to new trade restrictions
Over the past several weeks, political tensions between Japan and China have remained high after Japanese Prime Minister Sanae Takaichi indicated that a Chinese naval blockade or invasion of Taiwan could justify Japanese military intervention. In addition to both countries increasing military drills in nearby waters, Chinese officials have begun implementing new trade restrictions on Japan, possibly as a punitive response to the simmering tensions. In early January, Chinese officials issued a ban on the export of dual-use items for military purposes to Japan, with affected products including aerospace engine components, graphite and its products, and certain tungsten-nickel-iron alloys.
Beijing further escalated export restrictions on January 8, when reports surfaced that China has been withholding rare earth material and magnet export licenses to Japanese companies across all industries. It Is unknown when the supply of licenses may resume, and production at Japanese manufactures could face disruptions if the halt continues indefinitely. Additionally, on January 7, China launched an anti-dumping investigation into imports of Japanese dichlorosilane, a key chemical for the manufacturing of semiconductors. The investigation will likely continue for one year before any duties are enacted.
U.S. and Taiwan close to reaching trade deal
According to recent reports from Taiwanese negotiators, trade talks between the U.S. and Taiwan have made significant progress, and a finalized deal could come as early as by the end of January. The two sides have reportedly reached a consensus on several key issues during negotiations. The Taiwanese government ultimately hopes to lower U.S. tariffs from 20% to 15% and has also advocated for most-favored treatment on exports of chips and other products, as well as for a strategic partnership on artificial intelligence. In return, Taiwan Semiconductor Manufacturing Corporation (TSMC) could commit to opening more manufacturing facilities in the U.S. It is unknown what other issues could be included in the final deal.
Mexican government raises tariffs on over 1,400 products in response to economic conditions and U.S. negotiations
On January 1, Mexico’s government enacted measures that increased tariffs on more than 1,400 imported products. The increased tariffs will remain in force through at least the end of 2026 and will affect products from various industries, including automotive parts, textiles, plastics, steel, appliances, aluminum, toys, and footwear. All countries that do not have a free trade agreement with Mexico will be impacted, including China, South Korea, India, Vietnam, Thailand, Taiwan, Indonesia, Brazil, South Africa, the United Arab Emirates, and Nicaragua. Mexican authorities have stated that the policy is intended to rebalance market conditions, prevent economic distortion, and support the relocation of strategic industries. The policy could also limit the transshipment of Chinese goods to the U.S. through Mexico, representing a longstanding concern of U.S. policymakers that low Mexican tariffs encourage this practice amid ongoing U.S.-Mexico trade talks.
U.S. plans additional tariffs on Nicaragua and threatens to impose tariffs on countries doing business with Iran
In December the U.S. announced new plans to impose additional tariffs of up to 15% on Nicaragua. Under the proposal, the new tariffs would begin at 0% in 2026, rise to 10% in 2027, and reach 15% in 2028. The tariffs would be applied on top of the existing 18% reciprocal tariff already in place. Goods covered under the Dominican Republic–Central America–United States Free Trade Agreement (DR-CAFTA) would be exempt from the additional tariffs. These measures are being pursued in response to alleged labor rights violations, human rights abuses, and the erosion of the rule of law in Nicaragua. Major exports from Nicaragua to the U.S. include apparel, gold, and rolled tobacco.
Additionally, on January 12, President Trump threatened to immediately enact a 25% tariff on countries doing business with Iran. No further details were specified on which countries would be affected or what volume of trade with Iran would qualify a country for these new punitive tariffs. Targeted countries could include major Iranian trade partners such as India, Turkey, and China, although India and China are still engaged in ongoing negotiations to reduce U.S. tariffs. The threatened trade restrictions are likely in response to alleged government repression of protests that broke out in Iran in early January.
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