Amazon, Google and Microsoft to get tariff relief from Trump admin on chips for data centres, says report — What we know

United States President Donald Trump intends to give big tech players in the country, including Microsoft, Google and Amazon, tariff exemptions on chips used for their artificial intelligence data centres, keeping in mind the AI boom, according to a Financial Times report on 9 February.

The US Department of Commerce is expected to frame the cuts to investments made by the world's largest chipmaker, Taiwan Semiconductor Manufacturing Company, as per the FT report, citing an official from the administration. TSMC has committed to invest $165 billion to build factories in the US, the report noted.

FT said that TSMC declined to respond to queries, while the Commerce Department and White House did not respond till the time of writing.

How will the tariff relief work?

According to the report, the White House has agreed to cut tariffs on imports from Taiwan to 15% in exchange for $250 billion in investments in the domestic chip industry, with exemptions for companies, including TSMC, tied to their US expansion plans.

The report cited a Commerce Department outline saying that for semiconductor plants in the US by Taiwanese players, 2.5 times the planned capacity can be imported tariff-free during the construction period.

Taiwanese chip companies that already have plants in the US will be allowed to import 1.5 times their capacity tariff-free.

Why is this ‘rebate’ programme under works

The “rebate programme” seems geared at pushing TSMC to shift more production to the US. It would allow TSMC to allocate exemptions “it earns” to its US customers when the next set of tariffs is imposed, as per the report.

Plans are not definitive or signed by Trump yet, sources added. “We’re going to be monitoring what unfolds after this is unveiled like hawks to make sure that the integrity of what we’re trying to accomplish with the tariffs and the rebates isn’t undermined and that this doesn’t end up being a giveaway to TSMC,” the official told FT.

At present, only a small number of chips imported into the US and then exported to China (e.g. by AMD and Nvidia) are subject to 25% tariffs imposed by Trump, citing national security reasons. Items that are not re-exported are exempt.

Can Taiwan relocate chip production to US?

The Trump administration is aiming to get around 40% of Taiwan's semiconductor production capacity shifted to the US, a target that negotiators from the island country consider "impossible" to achieve, according to an AFP report.

US Commerce Secretary Howard Lutnick warned last month that failing to shift up to 40% of Taiwan's chip supply chain and production to the US could lead to higher tariffs on the leading chip manufacturing nation.

However, in an interview with local TV channel CTS on 8 February, Vice Premier and lead negotiator Cheng Li-chiun said she had made it clear to US officials that Taiwan's semiconductor ecosystem would not be relocated. With regards to "40 or 50% of production capacity (being) moved to the United States... I have made it very clear to the US side that this is impossible," Cheng said.

She added that Taiwan's semiconductor ecosystem was like an “iceberg”; the foundation beneath the water is "enormous", adding that “an industrial ecosystem built up over decades cannot be relocated. It will only continue to grow larger,” the AFP report added.