Former Commerce Secretary Wilbur Ross joined "Forbes Newsroom" to discuss President Trump's tariffs on semiconductors and the timeline to build semiconductor factories in the U.S.
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00:00Secretary, I would love to turn to semiconductors because that's where we saw a lot of that mixed
00:04messaging, especially over the weekend. The Trump administration said that they are conducting a
00:08Section 232 investigation into the import of semiconductors, and this is largely viewed as
00:14a harbinger to implement tariffs. I'm curious how you think the Trump administration is doing
00:19vis-a-vis semiconductors and tariffs. Well, 232 is the basic legislation. Section 232
00:28is the basic legislation that we used in the Trump's first administration. So that ground
00:37is very well trodden. It's been tested all the way up to the Supreme Court. So there's one good thing
00:45about it is we know that it works, and we know that it will be upheld on appeal. What's bad about it
00:54is it slows things down a bit because you have to prepare and research a very detailed report.
01:03You have to get the written concurrence of the Secretary of Defense. You have to have public
01:10hearings. You have a whole lot of steps you need to go through. So it's better in the sense that
01:18it's more bulletproof. It's worse in the sense that it takes a bit longer to complete.
01:27But as to whether we need a program for semiconductors, I think we clearly do.
01:36You may remember I was the big proponent of the CHIPS Act in the first administration,
01:43and whether it did get passed and it's finally getting to be implemented. Even that will not
01:52make us self-sufficient in semiconductors. We still will be importing a majority of the semiconductors
02:02that we consume. And we are, in fact, the world's largest consumer of semiconductors.
02:10So it is important to put up a tariff wall so that there's further assurance to people building
02:19semiconductor fabrication in the U.S. that they will have a market, and they will have a market
02:27that's not interfered with by products subsidized from other countries.
02:33Before we move on there, I do want to get your take on what you would say to Secretary Lutnik about
02:40the Section 232 because you gave a pros and cons list. He has nine months to complete the investigation,
02:47but he indicated that he will implement tariffs on semis in one to two months. What's your advice
02:54to him when it comes to this Section 232?
02:56Well, clearly, any time a president asks for something to be investigated, he has a target
03:05that the end result of the investigation will be a recommended action. Otherwise,
03:12he wouldn't bother to request the investigation to be done. So that's pretty logical.
03:20As to Secretary Lutnik, as I've said, I think we need to become more self-sufficient
03:29in semiconductors. I think what's important, though, is whatever level of tariff they aim to put on,
03:38there perhaps should be a graduated path to it, because it takes two to three years to build a
03:50semiconductor facility and to train the workers to do it. It's very, very technical work, very precise work,
04:00because remember, you're dealing with very, very small things, a couple of nanometers in dimension,
04:11and it takes three nanometers to make one human hair in size. So you're dealing with really
04:19minute things, and you got to get it exactly right. So I think a phasing in of it in some way would make
04:32sense, because if you put a giant tariff on semiconductors right now, it won't stop the imports,
04:41because we do not have the capacity to make enough semiconductors. So all it will do is raise the cost
04:51of semiconductors. And therefore, I would recommend that they consider a ramp up over a couple of year
05:01time period.
05:02To that point, you can't exactly snap your fingers and make a semiconductor factory in the United
05:08States. As you said, it takes about two to three years. So do you think that these tariffs are
05:13premature? Would it make more sense for the tariffs to wait while we beef up domestic manufacturing?
05:20No, I don't think they're premature in the sense that
05:25We do need to send the very clear message that there are going to be very big tariffs on them from
05:38countries. We need to give businesses who are considering putting in a fabricating plan
05:46assurance that this is real, that there will really be tariffs.
05:50And remember, a fab plant is billions of dollars. These are very, very expensive things to build,
06:00because you need to make them pretty large scale. They have to be extremely clean.
06:07There are a whole lot of requirements that are much more precise than, let's say,
06:13building an automotive factory or something like that. So I don't think it's premature.
06:20Especially because if you go through the list of the president's several objectives,
06:28one of them is raising revenues. And so semiconductor tariffs are certainly one way to raise revenue.
06:38LESLIE KENDRICK
06:40Let's say you were commerce secretary right now. How exactly would you implement the semiconductor
06:45tariffs? Because you said you would do it in a more phased approach. What would that look
06:49like under commerce secretary Ross? LESLIE KENDRICK
06:53Well, what will be important will be, we probably will end up with different tariffs on the same product,
07:04depending on the country it comes from. And if we end up that way, then we will also need to work out
07:14with the lower tariff countries, a situation where they won't accept semiconductors to come in from,
07:28say, China on a trend shipment basis and benefit from the lower tariff of that other country.
07:38So it's going to be both sides of our supplier countries that we need to deal with. And that's a
07:49complication. The semiconductors also are not a homogenous entity. The size of the semiconductor in general,
08:04the smaller the smaller the smaller the smaller the smaller the smaller the smaller the smaller. The smaller the size, the more powerful and the more useful.
08:11So the commodity type ones, the very large ones are not necessarily of military significance,
08:21but are of commercial significance. A typical automobile has between 400 and 500 semiconductors in it,
08:32most of which are fairly commodity type.
08:36So there's also a difference, at least in my personal view,
08:42of the national security implications,
08:45depending on whether it's a very high-tech one or a very low-tech.
08:51So I would hope they give attention to not just the mass fact of semiconductors,
09:01but also to which size, which quality, which power they're dealing with
09:09and perhaps treat them differently.