Despite Campaign Rhetoric, Trump Unlikely to Repeal the CHIPS and Science Act
President-elect Donald Trump’s campaign rhetoric against the CHIPS and Science Act has raised concerns about the future of this crucial legislation. However, experts believe a complete repeal is unlikely, despite potential modifications and shifts in funding priorities. While Trump expressed dissatisfaction with the bill’s cost and approach, the underlying bipartisan support and the significant investments already made suggest a complete reversal is improbable. Instead, expect a reinterpretation and potential reallocation of funds, reflecting a shift in policy priorities.
Key Takeaways: What You Need to Know
- Trump’s stance: While publicly critical, a full repeal of the CHIPS and Science Act is deemed unlikely by experts. Expect adjustments, not complete dismantling.
- Act’s significance: The $53 billion investment aims to bolster American semiconductor production and compete with China. Significant funds have already been allocated to major players.
- Impact on Asian chipmakers: Companies like TSMC and Samsung have already received substantial funding commitments and will likely continue their US investments.
- Focus shift: Trump’s administration may prioritize different aspects of the bill and reallocate funds, potentially emphasizing tariffs over industrial policy.
- Long-term uncertainty: While a repeal is unlikely, the extent of changes and modifications under a Trump presidency remains to be seen.
The CHIPS and Science Act: A Brief Overview
The bipartisan CHIPS and Science Act, signed into law in August 2022, represents a significant commitment to revitalizing the American semiconductor industry. The act allocates nearly $53 billion to bolster domestic semiconductor manufacturing, research, and development. This initiative aims to enhance U.S. competitiveness against China, which has been aggressively expanding its own chip manufacturing capabilities.
The Act’s Goals:
- Boost domestic semiconductor production and reduce reliance on foreign suppliers.
- Create high-paying jobs in the tech sector.
- Strengthen national security by ensuring a stable supply of advanced chips.
- Invest in research and development to maintain technological leadership.
Trump’s Criticism and Potential Changes
During his campaign, President-elect Trump consistently criticized the CHIPS Act. He expressed concern over the bill’s cost and questioned the effectiveness of government subsidies in attracting chip manufacturing to the United States. During a three-hour interview with Joe Rogan, he stated: “We put up billions of dollars for rich companies to come in and borrow the money and build chip companies here, and they’re not going to give us the good companies anyway.” He argued in favor of his own policies emphasizing increased tariffs as a superior approach to attracting chip companies.
Shifting Priorities:
Paul Triolo, senior vice president for China and technology policy lead at Albright Stonebridge, predicts that while Trump might not outright repeal the CHIPS Act, he will likely attempt to reshape its implementation. Triolo stated on CNBC’s “Squawk Box Asia”, “There’s support for this kind of onshoring of advanced manufacturing,” suggesting that the fundamental goal of boosting domestic production will likely remain. However, significant changes in fund allocation and project prioritization are expected as the administration will aim to “spread the money a little differently than Biden“.
Adam Posen, president of the Peterson Institute for International Economics, echoes this sentiment, suggesting a parallel with Biden’s approach to Trump’s China tariffs. “I don’t think they’re going to roll it back,” Posen mentioned on CNBC’s “Squawk Box Asia”. He believes that the Trump administration will retain the core framework of the CHIPS Act but will likely reinterpret its guidelines directing funding more in line with their administration’s approach. Posen forecasts:”But I do think there’ll be much more expansion on the tariff front, rather than industrial policy expanding.“
Impact on Key Players: TSMC, Samsung, and Intel
The CHIPS Act has already spurred significant investments from major semiconductor companies. Taiwan Semiconductor Manufacturing Company (TSMC) has received a funding commitment of up to $6.6 billion for its Arizona facilities, while Samsung has secured $6.4 billion for its Texas expansion. Intel, a major American chipmaker, has been awarded $8.5 billion in funding. These significant investments indicate a strong commitment from both domestic and international companies to participate in the expanding American semiconductor market, irrespective of political shifts. While a change in administration could cause potential delays or shifts in project focus, it seems highly unlikely to entirely derail these ongoing projects.
The Slow Rollout and Future Uncertainties
Although the CHIPS Act has already seen some initial funding distributed, a significant portion of the allocated funds remains to be deployed. This slow rollout presents both challenges and opportunities. The slower pace could provide a window for the Trump administration to exert more direct influence over the distribution of remaining capital, but it also means that the underlying infrastructure and commitments are still developing and unlikely to undergo a dramatic complete reversal. Any changes under the new presidency will likely focus on alterations to the future trajectory of the act, not its immediate dismantling.
Conclusion: Navigating the Uncertainties
While President-elect Trump’s campaign rhetoric painted a negative picture for the future of the CHIPS Act, expert analysis suggests that a complete repeal is improbable. His administration is more likely to strategically adjust resource allocation and refocus the program’s priorities, potentially favoring tariffs over direct industrial policy subsidies. However, the fundamental goal of boosting U.S. semiconductor manufacturing, attracting global investment, and improving national competitiveness is unlikely to be fundamentally altered. The long-term implications of this evolving policy landscape remain somewhat uncertain, but initial interpretations suggest a course correction rather than a complete reversal of the Act itself.
