Are Tariffs Negatively Impacting America’s AI and Semi-Conductor Ambitions?
President Donald Trump has made his desire public for U.S. global dominance in the AI and Semi-Conductor (chips) markets; however experts suggest that his tariffs will hinder domestic chip production and put a stop to his ambitions of dominating the worldwide AI market. They are portraying the escalation in tariffs which will perhaps end in an all-out trade war will dramatically increase costs in American data centres and the building of semi-conductor fabrication plants, with some analysts predicting that tariffs will become the single largest barrier to supremacy in the A1 arena.
Tech experts and industry leaders suggest tariffs will inevitably hit global supply chains, thus negatively impacting and disrupting medium to very large AI computing projects. This will be a blow to major tech companies such as Meta, Google, and Amazon who between them have pledged just for 2025, USD 300 Billion on computing infrastructure which will underpin AI projects. Furthermore, TSMC (Taiwan Semiconductor Manufacturing Company Ltd) has already committed USD 100 Billion to increase the capacity of chip production in the U.S. which will underpin the above-mentioned AI ambitions.
Potential supply chain issues are at the top of the agenda for many big tech executives, with one executive currently attached to a USD 500 Billion data centre enunciating that the delay of one single component could affect the whole project as the supplier is making business decisions brought on by tariffs. One only has to look at other industries like the European Wine Sector where shipments may be halted because impending tariffs are stopping suppliers putting a price on future orders. Elsewhere in the steel pipe manufacturing arena, tariffs on Chinese built ships/bulk carriers effect on supply chains can be located in Germany where port workers should be loading a first round 16,000 MT of steel piping bound for a huge Louisiana energy project, however due to the proposed levies, the cargo is now sitting gathering dust in a German warehouse.
In the GPU (Graphics Processing Unit)* market, Nvidia’s most advanced model is utilised Microsoft and Amazon in their cloud service providers platform, however these GPUs arrive in the United States as racks of servers or just a single rack which have been assembled in a number of different countries according to data released by Z2Data (supply chain data analysis platform). This is where the economics get blurred because although GPUs have been exempt from tariffs, the many components which make the GPU have not been exempt. Experts suggest that importers in the U.S. will be hit with huge costs as component and product categories are massive and it is suggested that even the smallest component can bring the supply chain to a halt.
*Graphics Processing Unit – is a specialised electronic circuit designed to accelerate computer graphics and image processing. The GPU is essential for AI, particularly for tasks like training deep learning models and handling complex computations. Their parallel processing capabilities and high memory bandwidth allow AI to significantly accelerate their workloads.
Experts are saying that even if chips were produced in the United States, they would be more expensive to produce despite the 32% proposed tariff on chips produced by Taiwan’s TSMC, as tariffs would push up prices on all key tools and materials. They went on to say the biggest loser would be American producers of chips, as despite tariffs it will still be cheaper to factories and manufacturing capacity outside the United States, dashing Trump’s dream of domestic chip manufacturing. This is a catch 22 situation for President Trump, for once he cannot have it both ways having his cake and eating it, and analysts wait to see how he will solve this particular conundrum.
