Globalisation Fades: Tariffs, Chips, And Strategic Shifts

Globalisation Fades: Tariffs, Chips, And Strategic Shifts

Why in the News?

The revival of high tariffs and industrial policies in the U.S., under Donald Trump and Joe Biden, marks the decline of hyper-globalisation rooted in Adam Smith and David Ricardo’s free trade theories, especially in the semiconductor sector.

From Classical Trade Theories to Globalisation:

• Scottish economist Adam Smith promoted “absolute advantage” — nations should produce goods they can make efficiently and trade for others.
• David Ricardo expanded this into “comparative advantage,” proving trade is mutually beneficial even if one nation outperforms in both products.
• These ideas fueled global trade and industrial specialisation, forming the backbone of modern globalisation since the 1990s.

Semiconductors: The New Face of Strategic Protectionism

• Taiwan’s TSMC dominates global semiconductor production with a 56.7% share, making chips for AI, smartphones, and quantum computing.
• The U.S. grew concerned as Taiwan’s chip dominance posed security risks, especially if geopolitical tensions with China escalated.
• In response, the U.S. shifted from free-market faith to securing its chip supply chain via tariffs and subsidies.

Policy Shift: From Free Trade to Strategic Interests

• The U.S. enacted the CHIPS and Science Act to boost domestic chip manufacturing.
• TSMC is investing $65 billion in new Arizona plants, with U.S. subsidies backing the effort.
• Global trade is now guided by strategic security over pure economic logic — signaling a clear break from Smith and Ricardo.