Opinion by: Ahmad Shadid of O.xyz
The recent exemption of semiconductors from US President Donald Trump’s stringent reciprocal tariffs may seem promising; however, upon deeper analysis, it reveals itself as merely symbolic. A significant portion of semiconductors enters the US embedded within devices such as servers, GPUs, laptops, and smartphones, which remain subjected to heavy tariffs—some exceeding 49%. While the exemption appears politically favorable, its practical implications are rather limited. For instance, Nvidia’s DGX systems, essential for training advanced AI models, do not qualify for the exempted HTS codes, leading to potential effective tariffs approaching 40% on these critical components. Such financial burdens have the potential to undermine essential AI infrastructure projects nationwide.
Moreover, the tariffs may threaten the objectives outlined in the CHIPS Act, which promises billions in subsidies to bolster domestic chip manufacturing. The irony here is stark: advanced lithography machines—crucial equipment sourced from countries like the Netherlands and Japan—are facing tariffs of 20% to 24%. These tariffs, intended to enhance American production, instead inflate the cost of fundamental manufacturing resources.
Indirect Costs Undermine Exemptions for AI
Global and highly integrated semiconductor supply chains render the raw silicon exemption practically useless when finished products such as servers and GPUs are encumbered by hefty tariffs. This indirect inflation of costs erodes any competitive edge that might arise from domestic manufacturing efforts. High-end systems experience disproportionate impacts from these tariffs, rippling through AI model training, data center expansions, and significant infrastructural developments—ultimately slow down the sector’s growth trajectory.
Tariff Impasse Halts Investment
It is apparent that the current tariff strategy lacks a coherent economic rationale or calculated foresight, resulting in stalled investments across the technology landscape. Businesses require predictable operational costs to justify substantial capital investments, yet the ongoing volatility in tariffs inhibits such decision-making, leading to hesitance regarding new data centers and manufacturing capabilities. This scenario mirrors the chaotic supply chain disruptions of 2020, wherein uncertainty led to massive order cancellations and prolonged recovery delays. If tariff ambiguity persists, the technology sector may witness similar ripples in 2025, exacerbating existing inventory and revenue challenges within the semiconductor industry.
Domestic Production is Not Optimal
The rationale behind these tariffs hinges on the assertion that they will foster domestic production. However, they do little to facilitate genuine semiconductor manufacturing within the US. Despite the financial aid provided by the CHIPS Act, numerous American semiconductor entities remain reliant on international foundries for their manufacturing needs, facing elevated operational costs due to these tariffs instead.
AI Projects Face Heightened Risk
The blockchain and crypto sectors, particularly those leveraging AI technology, are not immune to the adverse effects of increasing tariffs. Projects reliant on GPUs and high-performance servers for tasks such as mining and transaction validation are experiencing direct hits to profitability and growth, which could stifle innovation in blockchain applications. While interest from investors surged just a year ago, many of these projects are now navigating tighter budgets. Elevated costs threaten to lead to stagnation, prompting innovators and developers to potentially exit the market, with repercussions extending beyond the technological realm and jeopardizing future digital economies.
Furthermore, these cost pressures disproportionately impact startups and smaller tech firms. While established industry giants might possess the capacity to absorb increased expenses, smaller, more innovative players face existential risks. This dynamic poses a significant threat to grassroots innovation, jeopardizing the tech ecosystem’s overall health.
What to Expect
While semiconductors have temporarily evaded direct tariffs, the exemption holds minimal benefit. Tariffs continue to burden finished products, inflating indirect costs across the industry. Instead of nurturing domestic manufacturing, these tariffs are stifling economic activity, hindering vital infrastructure projects, and jeopardizing America’s leadership in AI innovation. It is imperative for policymakers to recognize these harsh realities and adjust their approaches to avert irreversible damage to the nation’s technological future.
Opinion by: Ahmad Shadid of O.xyz.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
