On Everything Bagels and American Semiconductor Manufacturing

Writing in 2023 in The New York Times, Ezra Klein argued against “everything-bagel liberalism,” a style of governance that attempts to have it all and very often gets none of it. “You might assume that when faced with a problem of overriding public importance, government would use its awesome might to sweep away the obstacles that stand in its way,” Klein wrote. “But too often, it does the opposite. It adds goals—many of them laudable—and in doing so, adds obstacles, expenses and delays.”

These kinds of programs are familiar, even rote at this date. Unsatisfied merely to build new housing or stimulate semiconductor production or expand the nation’s broadband networks, Democrats are prone to pile on extraneous mandates to such programs: environmental mandates, employment quotas, diversity schemes, permitting requirements, and other paperwork burdens intended to secure who knows what end. Tradeoffs are a fact of life, and every cost-increasing mandate and government form, no matter how pleasing to the progressive palate, decreases the probability of a given program’s central objective being achieved in timely fashion, if at all.

Republicans have enjoyed ridiculing and slapping around everything-bagel liberalism; it is an easy business, usually. But the GOP has begun to develop a taste for a similar kind of economic planning—especially on the topic of industrialization and protectionism. Politico reports that the Trump administration is formulating a new set of tariffs on semiconductors for the purpose of protecting American chip makers from foreign competitors.

Politico summarizes of the forthcoming policy’s contradictions: “The fight lays bare a contradiction at the heart of the administration’s tech agenda: Its drive to rebuild American chipmaking is running headlong into Trump’s promise to win the AI race. Tariffs meant to force chip production back onshore would, the industry warns, tax the very imports the AI boom depends on—and could force U.S. companies to cancel some of their plans to build data centers.”

Just on Monday, the President on Truth Social said this about data centers: “The only reason that communities throughout the U.S.A. should not want Data Centers is if they want to end up being backwards and poor. If they want to be successful and rich, with far lower taxes and jobs all over the place, let Data Reign.”

If the reign of data is to arrive, semiconductors made abroad must not, in service of the White House’s protectionist superstitions, be made artificially expensive. Input costs paid by American businesses consume finite capital that, mathematically, cannot be spent elsewhere. Particularly in the case of semiconductors made or partially made in Taiwan, domestic industry, if subjected to chip tariffs, will discover its progress toward the sunny uplands of American technological dominance hampered, if not thwarted.

Time as a constraint in economic action and economic planning is routinely discounted. On the one hand, planners often concoct elaborate systems based on market conditions that, by the date of implementation, no longer obtain. On the other, planners think they can speed time along and bring about developments that can be had only over the course of decades. Former President Joe Biden committed this latter error during his administration, and Trump, too, is doing so today.

The contours of any given market, domestic or international, are shaped by preexisting conditions—conditions geographical, ecological, legal, cultural, historical, etc. Many of these conditions cannot be radically altered or done away with on command. If the prime minister of Great Britain were to deploy the whole of his power and influence to make British wine superior to French, he would almost assuredly fail. The American semiconductor industry is arranged as it is for good reason—as is Taiwan’s and those of other nations. In 2023, Jordan McGillis and Clay Robinson described many of the advantages enjoyed by Taiwan and disadvantages that stand as barriers to the United States.

That is not to say the American semiconductor sector can, as if by some law of nature, never expand to occupy a larger share of the global market. Nor should it be assumed that Taiwan’s will maintain its place in perpetuity. Markets are fluid, and flux is the rule. Even still, should the Trump administration play the protectionist with respect to American semiconductor sector, it is wholly unlikely that domestic production will, on command, expand rapidly, without any unintended inefficiencies, to the degree that American companies will cease to rely upon imported semiconductors for their operations. And so long as American data center operators have need of these imports, they will find themselves confronting the great enemy of prosperity: artificially high input and operational costs foisted upon them by the state.

“The math literally just does not work,” said a member of the technology industry, who spoke anonymously to Politico. “The volume they’re talking about granting duty-free wouldn’t cover the hyperscalers alone, let alone the rest of the industry. Those are chips we physically can’t buy here, because the capacity doesn’t exist yet.”

The Trump administration desires to facilitate the world’s leading technology sector and to “[reshore] semiconductor manufacturing.” But politics, like life itself, does not provide many chances to get everything one wants.

Tradeoffs must be made, and facts considered as they are. As Russell Kirk once wrote: “Deny a fact, and that fact will be your master.”