Trump Proposes to Remove the CHIPS Act, Calls It a “Horrible” Thing

Key Takeaways

• In a speech on Tuesday, Trump criticized the CHIPS act and called for it to be removed.
• He wants the remaining money to be put to some good use, such as clearing off some of the US's debt.
• However, as per inside sources, there's no real threat to the act yet. It's not going anywhere.

On Tuesday, President Donald Trump said that the US should get rid of the 2022 CHIPS act that gave a $52.7 billion subsidy to semiconductor manufacturers. He called it a horrible, horrible thing".

We give hundreds of billions of dollars and it doesn't mean a thing. They take our money and they don't spend it. - Trump

Trump told House Speaker Mike Johnson to get rid of it immediately and use the remaining money (approximately $36 billion has already been paid out) for something fruitful such as paying off debts.

However, as per inside sources, this is still just Trump's personal feelings and not an official decision. There's no political basis to remove the act yet. In fact, in the current budget proposal as well, there was no sign of the act being in danger.

What Is the CHIPS Act?

The CHIPS Act was introduced by Joe Biden in 2022. While the world was slowly coming out of the two-year pandemic and lockdown, the US was hit by a massive chip crisis. That's because the country was heavily reliant on foreign countries for chip imports.

So Biden decided to incentivize chip manufacturing to boost domestic production. This is what Trump wants as well - to boost production within the US borders and to reduce reliance on other countries. But he has an issue with the approach.

For instance, he worries that this act will benefit China indirectly because some of the companies receiving the funds have ties with China. He also has a problem with big corporations, which are already making a substantial profit, and benefitting from this scheme.

Most importantly, he is worried that while the act was a step in the right direction, it was not enough to boost domestic production. There needs to be a more rigid framework to ensure that the beneficiary companies are actually using the money to give back to the US.

Is Dumping the CHIPS Act a Legit Solution?

Trump's concerns are certainly valid but removing the act out of nowhere might not be the best way to handle it. For instance, companies like Intel have secured $7.86B from the CHIPS Act for its semiconductor manufacturing projects in Arizona, New Mexico, Ohio, and Oregon.

Clearly, the Act has helped speed up the chips shortage in the face of growing demand for AI. A better solution can be to resolve the issues within the act.

For starters, Trump's administration can create a tighter framework around who benefits from the scheme. Companies that are already financially stable or those who have ties with China can be excluded.

Similarly, they can also create a set of guidelines that each company will have to follow if they want to benefit from this scheme. For example, they can direct companies to make their supply chain 100% US-based and to hire more local talent to boost employment.

The ultimate goal is to make the US independent in terms of technology and the CHIPS act is a great tool for that. All that it needs is better execution and a little more control.

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