The ‘Chip War’ under Trump

By Aaron Mak, featuring Chris Miller, Associate Professor of International History at The Fletcher School

Semiconductors are quickly taking their place as perhaps the world’s most coveted products. They might not be redrawing maps or starting wars, like the spice trade or petroleum, but in the past few years the $600 billion chip trade has risen to the top of global conversations around security and economic dominance.

It’s also a very fragile ecosystem. The microchip supply chain is dizzyingly complex and full of chokepoints — not least the dominance of geopolitically vulnerable Taiwan. And it has been thrown into upheaval by the transition between Presidents Joe Biden and Donald Trump, whose trade policies take sharply different approaches to keeping China in check.

Tufts University historian Chris Miller is the foremost academic expert on the semiconductor trade; his influential book Chip War was required reading for the Biden administration during the implementation of the CHIPS Act.

Since Miller published it in 2022, microchips have become even more important — and more contested. What’s changed lately, and what issues does it raise for policymakers?

DFD spoke with Miller about the rising tensions. “U.S.-China tech competition has intensified, and semiconductors have really taken center stage, in part because of their role in AI,” said Miller.

He saw the CHIPS Act was a major step forward for insuring against a doomsday scenario in which the U.S. suddenly loses access to Taiwan’s chip fabrication plants, but hasn’t necessarily made up for China’s recent strides in manufacturing. He also identified a couple of ways that Trump’s renegotiation and tariff strategies could backfire, and highlighted a hidden risk of the president’s recent chip deals in the Middle East.

Oh, and he said a Chinese invasion of Taiwan is still a bigger risk than people think.

Why the CHIPS Act was a good start (but not enough): As Chip War documents, China’s rise as a chipmaker was very deliberate, launched by President Xi Jinping around 2014. Thwarting Xi’s bid for semiconductor dominance has been a major focus of U.S. tech policy under both Biden and Trump, though with very different tools.

Biden supported export controls on powerful chips, and took an investment-driven approach to bring chip manufacturing back to the U.S. The CHIPS Act, with its industrial subsidies, has been “a big deal,” said Miller, pointing to the Taiwan Semiconductor Manufacturing Company’s (TSMC) $165 billion investment to build plants in Arizona. “It gives a meaningful amount of room to maneuver in a worst-case scenario.”

But there are limits to how much it has accomplished. China isn’t the world’s leading microchip power, but Miller thinks it has made significant progress even since his book came out, thanks to its frenzy of domestic manufacturing investment beginning in 2023. “It’s closed the gap between its aspirations and reality,” he said.

TSMC still fabricates about 90 percent of the world’s most advanced semiconductors, around the same level as in 2022. A Chinese invasion or blockade of Taiwan would thus knock out a linchpin of the U.S.’s chip supply chain — a threat Miller believes has only intensified since 2022.

Not only have China’s military powers grown, but its recent investments in domestic manufacturing have lessened its dependence on Taiwan’s fabricators. “China’s actually beginning to kind of develop some insurance against the economic cost of knocking off Taiwan,” Miller said. “I don’t think that, either at the U.S. government or corporate level, people are really pricing in the risk.”

An “America first” chip strategy could backfire: Biden’s chip strategy was built on the carrot of investment subsidies. Trump’s is built on the stick of tariffs. The president claims that he used the threat of 100% tariffs to convince TSMC to pitch in an additional $100 billion for its U.S. expansion, up from the $65 billion it pledged right before he took office. (TSMC declined to comment to DFD on whether the prospect of tariffs was the motivation.)

Miller said that tariffs are a reasonable chip policy to a certain extent, but could end up dashing the U.S.’s chances of leading the AI boom by making high-end chips too expensive. “It’s those chips scal[ing] at as low cost as possible that enable AI, enable our tech firms,” he said.

Trump is a fierce critic of the CHIPS Act, wary of using public money to promote domestic manufacturing. Commerce Secretary Howard Lutnick told senators at a budget hearing last week that the administration is actively renegotiating CHIPS grants, pushing manufacturers to put more skin in the game.

This, too, could ultimately backfire, said Miller. “Companies are not going to do more than is economically rational,” he said. “That will be a limiting factor in terms of what kinds of renegotiations we end up seeing.”

An overlooked risk of the Middle East chip deals: Trump has also been promoting the use of U.S. semiconductors abroad. Deals between American AI companies and Gulf states were a centerpiece of Trump’s Middle East tour in May.

Some in Congress saw this as a security threat. Rep. John Moolenaar (R-Mich.) worries that it would give Beijing yet another way to steal U.S.-made chips that America legally bars from selling to China. (China’s recent manufacturing strides have mainly been with mid-to-lower tier chips, so it still needs to smuggle in the higher-end units needed for AI.) This tension between national security and business development has long plagued the chip industry – Chip War recounts similar congressional handwringing over American companies sharing advanced research with the Dutch firm ASML to improve chip printing in the 2000s.

Miller said the national security objections could have some merit, but also added that smuggling computing power is no longer a matter of just getting your hands on physical chips. “Most data centers like those from cloud computing are accessed remotely,” said Miller. “So one of the key questions for the Middle East deals is not just whether the chips will stay where they are, but will the computing be accessed remotely by entities that shouldn’t be accessing it?”

Miller still believes that U.S. export controls should focus on the most advanced semiconductors. Those are the chips China wants, and Miller isn’t sold that the country will be able to up their production anytime soon. He said, “The evidence we have right now is that because China’s own production capacity is so constrained, that’s not realistic over the next couple of years.”

(This post is republished from Politico.)