The AI Industry: Trump's Chip Tariffs Are the “Worst Possible” Path to Leadership

According to Politico, over the coming “weeks or months” the Donald Trump administration may impose a broad set of tariffs on semiconductors. Roughly eight sources familiar with the matter said on condition of anonymity that one scenario under consideration would sharply expand the list of goods covered: the tariffs would hit not only the chips themselves, but also the products that use them — from gaming consoles to the servers that fill data centers. There is even talk of taxing used and refurbished equipment with chips inside.

For the industry, this is a nightmare scenario. In June, the Computer & Communications Industry Association (CCIA) estimated that such an approach would cost the U.S. about $90 billion in annual GDP losses and lead to the delay or cancellation of roughly 20% of the data-center projects planned before 2030. What's more, the tariffs could push data-center construction outside the U.S. — the exact opposite of the stated goal of bringing manufacturing back home.

The contradiction

The industry points to a contradiction built into the plan. Slapping a chip tax on data centers precisely when they need to buy as many chips as possible to scale up AI infrastructure is no way to boost demand for domestic products. Building fabs in the U.S. takes years, and that timeline can't be sped up, so companies will remain dependent on imports. As The Next Web put it, “there is no scenario in which domestic production will be ready by the time the chips are needed for construction.”

“This may be the worst conceivable way to pursue American dominance in AI,” said one representative of a major industry group who had worked in the first Trump administration. “It's like tripping yourself up right out of the gate.”

Lutnick's position

In a letter to Treasury Secretary Scott Bessent, signed by roughly 20 industry associations, the sector warned that the tariffs would drive up the prices of smartphones, laptops, tablets, smartwatches and cars at a time when household budgets are already stretched. “Consumer devices are the primary interface through which Americans access AI,” the letter states.

To protect AI companies, the administration is considering partial relief, but according to sources it would be tied to foreign firms' investments in chip manufacturing on U.S. soil — like TSMC's. This is the approach favored by Commerce Secretary Howard Lutnick, who appears to be the one standing in the way of the exemptions the industry wants: he advocates a broad application of tariffs in order to bring supply chains back home. One scheme under discussion would allow only a limited volume of chips to be imported duty-free, tied to commitments to produce domestically.

Critics warn that such a volume “wouldn't even cover the hyperscalers alone, let alone the rest of the industry.” “The math simply doesn't add up,” one industry representative concluded. Against the backdrop of a shortage of high-performance chips that is forecast to persist until 2027, Gartner expects global semiconductor market revenue to reach $1.6 trillion as soon as 2026.

Source: Ars Technica