US Semiconductor Tariffs Could Reduce GDP Growth by $1.4 Trillion Over 10 Years, Costing American Households More Than $4,000, ITIF Finds

WASHINGTON—A sustained 25 percent tariff on semiconductor imports would cause a 0.76 percent slowdown in U.S. economic growth over 10 years, costing the average American more than $4,000 cumulatively by the 10th year, according to a new report by the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy.

Moreover, ITIF estimates that federal revenues from semiconductor tariffs would be wiped out by far greater reductions in consumption and income tax revenue. By year 10 of a sustained 25 percent tariff scenario, that cumulative net loss would be more than $165 billion.

“Imposing tariffs on semiconductors is like taxing the very foundation of the digital economy,” said Stephen Ezell, vice president of global innovation policy at ITIF and one of the report’s authors. “Rather than strengthening America’s economy or manufacturing base, tariffs drive up costs, slow innovation, and erode U.S. leadership across critical technology sectors like AI, cloud computing, and advanced manufacturing.”

ITIF’s new report models the potential impacts of a blanket tariff on U.S. semiconductor imports and shows how the costs would ripple through the economy under three scenarios: sustained 10 percent tariffs, 25 percent tariffs, and 50 percent tariffs.

▪ A sustained 10 percent semiconductor tariff would lead to 0.20 percent lower GDP growth than would otherwise be the case over 10 years.

▪ A 25 percent semiconductor tariff would lead to 0.76 percent lower GDP growth over 10 years.

▪ A 50 percent semiconductor tariff would lead to 2.56 percent lower GDP growth over 10 years.

Focusing on the middle scenario, the report finds that a sustained 25 percent tariff on semiconductors would shrink the U.S. economy by a cumulative $1.4 trillion over 10 years—equivalent to $4,208 per American household.

Meanwhile, semiconductor tariffs also would raise the prices of other information and communication technologies (ICT), so U.S. manufacturers, data centers, and other downstream industries across the economy would face higher input costs, leading to lower ICT consumption and capital stocks, which would reduce their productivity and global competitiveness at a time when rivals like China are accelerating state-backed innovation and production.

Under the 25 percent tariff scenario, ITIF estimates that lower productivity and reduced economic growth would reduce consumption and income tax revenue by nearly $186 billion over 10 years, while the federal government would collect a total of just $21 billion in semiconductor tariffs, leaving a cumulative net loss in tax revenue of $165 billion.

Cumulative GDP growth foregone from a 25 percent semiconductor tariff

Cumulative loss in GDP per capita from a 25 percent semiconductor tariff

U.S. ICT capital stock after imposing a 25 percent semiconductor tariff ($ billions)

Cumulative net tax revenue after imposing a 25 percent semiconductor tariff ($ billions)

To strengthen America’s semiconductor leadership without hurting the broader economy, ITIF recommends policymakers:

▪ Reject blanket tariffs on semiconductor imports that raise costs across the board.

▪ Expand federal investment in semiconductor R&D through programs like the CHIPS Act.

▪ Forge stronger public-private partnerships to accelerate domestic chip production.

▪ Enact targeted tax incentives and streamline regulations to boost U.S. manufacturing.

▪ Secure access to global semiconductor supply chains while building strategic resilience at home.

“America’s innovation advantage rests on affordable access to the world’s best technologies, not walls that isolate us from them,” Ezell concluded. “There are better ways to revitalize U.S. semiconductor manufacturing that don’t impose massive costs on American families, industries, and our economy at large. It is critical congress reassert its tariff authority to pursue smart strategies that strengthen—rather than undercut—U.S. technological leadership.”