President Trump’s recent announcement of varying tariffs has cast a shadow over the tech sector, leading to fluctuating stock prices and investor anxieties. Companies like NVIDIA, Taiwan Semiconductor Manufacturing Co (TSMC), and AMD have all experienced market volatility, largely in response to the potential implementation of a 25% tariff on semiconductors imported into the United States.
These proposed tariffs are reportedly part of Trump’s strategy to boost domestic semiconductor and AI-related manufacturing. However, industry experts suggest that most companies are hesitant to make drastic changes to their long-term strategies, seeing the tariff threats as just another element in an already unpredictable industry.
“Tariffs are more of a blip as opposed to a strong headwind,” noted Scott Almassy, semiconductor lead at PwC. Nazar Khan, co-founder and CTO of data center company Terawulf, added, “No one’s really changing what they’re doing because it’s just too much guesswork.”
A Complex Ecosystem
Trump’s tariffs could be put in effect as early as April 2, 2025, prompting industry players to find ways to mitigate costs. Khan mentioned that Terawulf is trying to speed up deliveries to beat the tariffs. For deals finalized later in the year, negotiations between businesses will determine who shoulders the additional financial burden.
“Some suppliers have been like, ‘We’re not taking it—you have to pay it,’” Khan explained. “Others are willing to share in the cost because they want us to sign a deal now rather than waiting to see what happens on the tariffs.” Economists are quick to point out that tariff costs often get passed on to the end consumer.
Mary Lovely, a senior fellow at the Peterson Institute for International Economics, stated, “In the first trade war, the evidence was very consistent, and strikingly so, that 100% of the tax was passed forward to the American buyer.” Lovely’s recent paper projects that Trump’s January tariff proposals on Canada, Mexico, and China could cost the average U.S. household over $1,200 annually. The semiconductor tariffs, specifically, would likely raise the prices of any product with chips, including gaming devices, cars, and smart appliances.
However, the impact on AI product prices, such as those for ChatGPT, may not be as straightforward. The cost dynamics within the developing AI field have never been constant. The Deepseek breakthrough of last month solidified the long-term trend that the expense of producing and maintaining models goes down with the ongoing advancements in technology.
“The question becomes, was the trend going down so much that the 25% is absorbed?” Khan asked. Additionally, the high demand for AI empowers many companies in the sector to maintain healthy profit margins, which provides some financial flexibility to manage price fluctuations. “Users are so willing to pay right now that it’s probably less impactful for those folks who are procuring them and building out the clusters,” Almassy observed.
Pressure on Taiwan?
TSMC is a major force, manufacturing the chips that power numerous devices and are crucial to key American AI players like NVIDIA. One of Trump’s primary reasons for the tariffs, he stated, was to encourage more chip manufacturing within the United States’ borders. In February, he accused Taiwan of “taking our chip business away,” and warned, “If they don’t bring it back, we’re not going to be very happy.”
Leaders from both parties have backed this initiative, concerned about America’s dependence on a specialized product manufactured on an island nation that China appears keen on controlling. President Biden attempted a different tactic through incentives: Last year, the Commerce Department allocated up to $6.6 billion for TSMC to expand its Arizona facilities as part of the CHIPS Act. However, this facility has experienced delays due to regulatory complexities and a lack of local expertise.
Most Taiwanese chipmakers have downplayed the potential impact of the tariffs, with Vanguard labeling the impact as “trivial” and stating the company was not considering setting up operations in the U.S. Taiwan’s economy minister said that “there is an advantage of technological leadership and that cannot be replaced.” Almassy agreed, stating, “Especially at the leading edge of AI, which is where Taiwan is, there is no alternative at the moment.”
“Taiwan companies will probably be able to pass a lot of that on to their direct customers, who will then have to figure out what they’re going to do with it,” Almassy explained. Some of these key customers include major American AI companies such as NVIDIA and OpenAI, who are leading the country’s AI advancements to compete with China.
Some analysts believe that the tariffs could hinder these companies’ efforts to stay at the forefront, especially as AI labs in countries like France and Japan can buy chips tariff-free. “It does probably hamstring American companies a little bit by increasing their costs,” Almassy said. “And if you’re the leader and your resources cost more, you have further to fall than someone not as advanced.” A representative for NVIDIA declined to comment.
Other Global Impacts
The tariffs could result in companies shifting factory locations. However, Almassy noted that many companies were already in the process of relocating before the tariff threats, due to the need to strengthen supply chains and prevent shortages similar to those experienced during the pandemic. “There’s a general movement by the industry to diversify where the supply chain sits,” Almassy said.
In a September discussion with Goldman Sachs CEO David Solomon, NVIDIA CEO Jensen Huang indicated that if access to Taiwanese components were disrupted, “we should be able to pick up and fab it somewhere else.” However, Huang acknowledged that NVIDIA might not achieve the same level of “outperformance or cost.”
Trump cited Apple’s announcement to open an AI-related factory in Texas and invest $500 billion, hiring 20,000 people in the U.S., as a victory. Nevertheless, analysts point out that Apple made similar promises at the beginning of both the Biden and Trump administrations.
Many industry members are choosing to watch and wait, as anything could change in the next six months. Trump has suggested that he may increase the tariff rate even higher, which could push companies to adapt. As Khan concluded, “The market’s moving very fast, and it takes time to develop and build new factories, So the tariff in and of itself may not be determinative for someone to decide to move a facility from Malaysia or Mexico to the US. They may not have the capabilities, money, understanding, or expertise.”
