US President Donald Trump announced that semiconductors and electronics will not be exempt from existing tariffs, confirming a 20% tariff on fentanyl instead of a proposed 145% increase. The US Customs and Border Protection had previously suggested exemptions for specific electronics.
Commerce Secretary Howard Lutnick remarked that certain electronics would face new levies within two months. Meanwhile, Trade Representative Jamieson Greer noted there are no planned discussions between Trump and Chinese President Xi Jinping amid ongoing trade tensions.
Risk sentiment improved slightly, with the US Dollar Index recovering from three-year lows. The US-China trade conflict began in early 2018, leading to tariffs on various goods.
Trade Stance And Semiconductor Tariffs
This latest guidance from Washington shows a firm stance, particularly in not bending to pressures for more carve-outs in the high-tech sector. Confirming that semiconductors and electronics will remain subject to existing tariffs removes earlier doubts introduced by suggestions from the US Customs and Border Protection. That agency had floated the prospect of making certain exceptions, but that now appears firmly shelved. The end result is that hardware imports face no softening—only new expenses.
A 20% tariff on fentanyl is notably lighter than what had been floated, suggesting a carefully weighed approach. Rather than the previously proposed 145%, which would have risked sparking fierce retaliation or logistical distortions, this current rate seems aimed more at holding posture than escalating conflict. It’s calibrated but not conciliatory.
The Commerce Department’s head, Lutnick, pointed out that further duties on electronics will come in within a couple of months. That reinforces the message—these trade restrictions are expanding rather than being relaxed. It also gives exporters and importers little time to restructure contracts or adjust supply chains. The implied window for action is tight, and any hedging strategies that haven’t already been entered will need swift attention.
Greer dismissed the possibility of higher-level discussion between the White House and Beijing’s leadership. This absence of diplomatic contact in the near term suggests that traders should not price in any sudden breakthroughs. There’s no scheduled negotiation through which tariffs might rapidly be scaled back. As such, positions reliant on quick reversals in policy could prove overly hopeful.
Market Implications And Risk Appetite
The modest uptick in risk appetite, seen in the Dollar Index’s bounce from a three-year trough, hints at selective positioning—likely a response to the tamer fentanyl duty as opposed to any broader de-escalation trend. From our perspective, the market was likely pricing in a more aggressive stance, and backed off slightly once the actual decision fell well below expectations.
Those engaging in derivatives linked to trade-sensitive sectors or FX pairs with exposure to Sino-American flows will need to factor in an extended period of friction. Any short-term plays built around speculation of tariffs being reversed should be reevaluated. The path suggests a continued grind rather than a pivot.
Timing is also relevant here. Two months until electronics levies kick in may appear to offer lead time—but in reality, that’s a narrow runway when considering contract rollovers and longer-dated hedges. Flexibility in position sizing and shorter durations may prove more valuable than expecting certainty from political cycles.
We assess that pricing in further stability on the back of this limited recovery in the dollar may be premature. The structure remains fragile given the lack of diplomatic progress and ongoing steady action on expanding trade barriers. The core functions of volatility remain engaged.
