TLDR
- Commerce Secretary Howard Lutnick clarified that recent electronics tariff exemptions are temporary until new semiconductor sector tariffs are established in “a month or two”
- Lutnick emphasized national security concerns regarding Chinese-made semiconductors and pharmaceuticals
- Trump warned “no one is getting off the hook” regarding electronics tariffs, promising a national security investigation into the semiconductor sector
- Market volatility has increased dramatically, with the S&P 500 reaching higher volatility levels than Bitcoin
- The US-China trade tensions continue to escalate with tariffs on Chinese imports now at 145%, while China has set retaliatory 125% levies on US goods
The Trump administration has clarified that the recent exemption of smartphones, laptops, and other electronic products from Chinese import tariffs will be short-lived, signaling continued economic uncertainty in the ongoing trade dispute between the world’s two largest economies.
Commerce Secretary Howard Lutnick walked back the tariff relief announced on April 12 by United States Customs and Border Protection. In an April 13 statement to ABC News, Lutnick explained that the exemption is only temporary until the administration establishes a new tariff regime specifically for semiconductor products.
“President Trump has called out pharmaceuticals, semiconductors, and autos. He called them sector tariffs, and those are not available for negotiation,” Lutnick said. “They are just going to be part of making sure we ensure core national security items are made in this country.”
National Security Concerns Drive Policy
The administration’s focus on national security appears to be a central motivation behind the tariff strategy. Lutnick emphasized that critical technologies cannot be dependent on foreign suppliers, particularly China.
“We can’t be relying on China for fundamental things we need. Our medicines and our semiconductors need to be built in America,” he stated.
Trump reinforced this position in a social media post on his Truth Social platform. He promised to launch a national security trade investigation into the semiconductor sector and the “whole electronics supply chain.”
“There was no Tariff ‘exception’,” Trump wrote. “These products are subject to the existing 20% Fentanyl Tariffs, and they are just moving to a different Tariff ‘bucket.'”
The president added: “We will not be held hostage by other Countries, especially hostile trading Nations like China.”
Market Volatility Reaches Record Levels
The back-and-forth on tariff policies has created extreme market volatility. The benchmark Standard & Poor’s 500 index has dropped more than 10% since Trump took office on January 20.
According to Bloomberg analyst Eric Balchunas, the S&P 500 stock market index is now more volatile than Bitcoin. The analyst reported that the S&P 500 Index hit a volatility level of 74 in April, compared to Bitcoin’s 71.
Markets have swung wildly with each policy announcement. Approximately $2 trillion was pumped into stocks on rumors of softer trade policies, only to be wiped away when Trump denied those rumors. Values then returned when the administration did issue a reciprocal tariff pause.
The Volatility S&P Index (VIX) remains elevated as investors grapple with the economic uncertainty caused by the changing tariff landscape.
China’s reaction to the exemption was measured. The commerce ministry described it as “a small step toward correcting its erroneous unilateral practice of ‘reciprocal tariffs'” and called for Washington to cancel the entire tariff regime.
Zhang Li, president of the China Center for Information Industry Development, told China Daily that the exemptions proved “how important China is to major US tech companies that rely heavily on the country for manufacturing and innovation.”
However, the relief may be short-lived. Lutnick indicated that new duties on critical technology products would be implemented within the next two months. These would fall outside Trump’s “reciprocal tariffs” on China.
“He’s saying they’re exempt from the reciprocal tariffs, but they’re included in the semiconductor tariffs, which are coming in probably a month or two,” Lutnick explained, predicting that the levies would bring production back to the United States.
The tariff exchanges between the two countries have escalated rapidly. US levies imposed on China have risen to 145%, while Beijing has set retaliatory 125% levies on US imports.
On Friday, Beijing stated it would ignore any future raises in tariffs by Trump, claiming they were already so high that there was “no market acceptance for US goods” in China.
China’s leader Xi Jinping said on Monday that protectionism “leads nowhere” and that a trade war would have “no winners.” The country has sought to strengthen ties with neighboring countries amid the escalating trade tensions, with Xi beginning a tour of Southeast Asia with a visit to Vietnam.
US Senator Elizabeth Warren, a Democrat, criticized the latest revisions to Trump’s tariff plan. “There is no tariff policy – only chaos and corruption,” Warren said on ABC’s “This Week.”
Economists have warned that the ongoing tariff dispute could slow economic growth and increase inflation, adding to the concerns of investors and businesses caught in the crossfire of the US-China trade war.
