A report by the Information Technology and Innovation Foundation (ITIF) has found that a sustained 25 percent tariff on semiconductor imports could slow U.S. economic growth by 0.76 percent over ten years, costing the average American household more than $4,000 cumulatively by the end of this period. ITIF is recognized as a leading think tank in science and technology policy.
The report indicates that federal revenues from such tariffs would be offset by greater reductions in consumption and income tax revenue. By the tenth year of maintaining a 25 percent tariff, the cumulative net loss could exceed $165 billion.
Stephen Ezell, vice president of global innovation policy at ITIF and one of the report's authors, stated, "Imposing tariffs on semiconductors is like taxing the very foundation of the digital economy." He added that instead of bolstering America's economy or manufacturing base, these tariffs would increase costs, hinder innovation, and weaken U.S. leadership in critical technology sectors such as AI, cloud computing, and advanced manufacturing.
The ITIF report models potential impacts under three scenarios: sustained tariffs at 10 percent, 25 percent, and 50 percent. A sustained 10 percent tariff could lead to a 0.20 percent reduction in GDP growth over ten years; a 25 percent tariff might result in a 0.76 percent reduction; while a 50 percent tariff could decrease GDP growth by 2.56 percent over the same period.
Focusing on the middle scenario of a sustained 25 percent tariff on semiconductors, ITIF projects that it would shrink the U.S. economy by $1.4 trillion cumulatively over ten years—equivalent to $4,208 per American household.
Semiconductor tariffs are also expected to raise prices for other information and communication technologies (ICT), increasing input costs for U.S. manufacturers and data centers across various industries. This would likely lead to lower ICT consumption and capital stocks, reducing productivity and global competitiveness at a time when countries like China are enhancing state-backed innovation and production.
Under this scenario, ITIF estimates that reduced productivity and economic growth would cut consumption and income tax revenue by nearly $186 billion over ten years while generating only $21 billion in semiconductor tariffs for the federal government—resulting in a cumulative net tax revenue loss of $165 billion.
To maintain America's semiconductor leadership without harming its broader economy, ITIF suggests policymakers reject blanket tariffs on semiconductor imports that elevate costs universally; expand federal investment in semiconductor R&D through initiatives like the CHIPS Act; foster stronger public-private partnerships to boost domestic chip production; enact targeted tax incentives; streamline regulations to enhance U.S. manufacturing; secure access to global semiconductor supply chains while building strategic resilience domestically.
Ezell concluded: “America’s innovation advantage rests on affordable access to the world’s best technologies, not walls that isolate us from them.” He emphasized there are better ways to revitalize U.S. semiconductor manufacturing without imposing massive costs on American families or industries.
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