Commerce Secretary Howard Lutnick spent September 2 on television describing the next round of semiconductor tariffs in a single sentence: build in the United States and pay nothing, build nowhere and pay to enter the market. He declined to give rates, product lists or a timetable. The Commerce Department's report on the matter is finished and has not been published.
That is an unusual amount of policy for an announcement containing no numbers, and it is worth understanding why the framing alone moves things. The principle Lutnick described converts a tariff from a tax on a country into a subsidy for building capacity in a specific place.
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What phase one already did
The first round was narrower than most readers assume. A proclamation signed January 14 imposed a 25% tariff, effective the following day, on certain advanced semiconductors and the products containing them, defined by technical thresholds for processing performance and memory bandwidth rather than by name.
It came with seven end-use exceptions, and they are broad: chips destined for US data centers, for repairs and replacements, for research and development, for US startups, for consumer electronics outside data centers, for industrial applications like factory robotics, and for the public sector. Anything below the technical thresholds was exempt too.
The result was a tariff that raised a real barrier at the very top of the performance range while leaving most of the actual import flow untouched. Phase two is described as covering considerably more, with servers, laptops and gaming hardware among the categories that could lose the shelter those exceptions currently provide.
The exemption is the policy
Whitmore's Watchlist:
TSM (Taiwan Semiconductor Manufacturing Company): Its committed Arizona investment is the clearest example of the domestic-capacity exemption the framework rewards.
SMH (VanEck Semiconductor ETF): Broad exposure across chipmakers and equipment, which spreads the single-company policy risk.
LRCX (Lam Research Corporation): Equipment demand tracks new fab construction, which is exactly what a build-here framework is designed to accelerate.
Structuring tariffs around where a company manufactures rather than where a product ships is the same design already used in pharmaceuticals, where a 100% tariff on patented drugs comes with a 20% rate for firms signing onshoring agreements. The tariff is not really trying to raise revenue. It is trying to change capital allocation, and the exemption is the instrument.
For investors, that changes what to look at. The relevant question about any chip company stops being which country it ships from and becomes how much US capacity it has committed to and how far along that capacity is. A firm midway through building a domestic fab is on a very different side of this line than one with an efficient plant abroad and no US plans.
It also creates a gap between the firms large enough to fund a fab and those that are not. AI startups, research labs and mid-tier cloud providers buy chips but do not build them, and a broadened tariff reaches them without offering the offset that a manufacturer can earn.
Living with an unpriced policy
The honest position on phase two is that nobody outside Commerce knows the rates or the timing, which means the market is pricing a distribution rather than an outcome. Positioning aggressively for a specific version of a rule that has not been written is a way to be right about the direction and wrong about the size.
What can be assessed now is exposure. Semiconductor demand is not softening: the same data center buildout driving electricity prices is driving chip orders, and equipment makers sit upstream of every new fab regardless of whose name is on it. That is a more durable thing to own than a guess about a tariff schedule.
The risk to watch is the second-order one. If phase two reaches servers and finished electronics, the cost lands on the companies assembling and buying those systems, and it lands in a quarter when input costs already carry a 25% top-end tariff and an oil price above $90.
Whitmore's Take: When a tariff is designed so that the exemption is the point, the useful question about a company is where it is building, not where it is shipping from. That is knowable today, unlike the rates.
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Written by Daniel Whitmore
Millionaire Insiders