AI industry says Trump plans to tax chips in the “single dumbest way imaginable” - Ars Technica

Donald Trump may be preparing to announce sweeping new semiconductor tariffs at the absolute worst time, the tech industry fears.

On Thursday, Politico reported that a wide range of new semiconductor tariffs, which the tech industry expects will “doom” artificial intelligence innovation in the US, could be imposed in the coming “weeks or months.”

About eight people familiar with the Trump administration’s plans were granted anonymity to discuss how the tariffs might work. They suggested that the framework for tariffs may change as it becomes finalized, but one approach under consideration could “dramatically expand the number of tech products subject to the duties, hitting not just chips but potentially many of the goods made with them, such as gaming consoles or the servers that fill data centers.”

That scenario is the tech industry’s nightmare. Since Trump took office, trade groups have warned that imposing tariffs on both semiconductors and the many downstream products that use semiconductors—potentially even taxing used or refurbished products that contain chips—would be ruinous for the economy.

Most absurdly, given the priorities of Trump’s AI Action Plan, that tariff approach would cost the US about $90 billion annually in GDP losses and cause about 20 percent of data center projects planned through 2030 to be delayed or canceled, the Computer and Communications Industry Association (CCIA) estimated in June. The tariffs could even drive more data center development outside the US, the CCIA warned, which seems counterproductive, since Trump is imposing them in order to force more development into the US.

Beyond disrupting the momentum of data centers, the tariffs could have wide-ranging ripple effects if certain products aren’t exempted, the CCIA said in a May letter to Treasury Secretary Scott Bessent, which was cosigned by about 20 trade groups.

For consumers, prices of “everyday tools,” like smartphones, laptops, tablets, smartwatches, connected devices, and vehicles, could increase at a time when US households are already budget-strained. Tariffs could also limit technology choices for Americans by delaying new product launches, including devices featuring the latest AI technologies. And any dampened demand for popular tech risks further limiting innovation while seemingly working in lockstep with tariffs to slow AI adoption in the US, the letter warned.

“Consumer devices are the primary interface through which Americans access AI-powered tools. AI only delivers on its promise when people can actually use it—and tariffs that price consumers out of the device market would slow AI adoption at the very moment the United States is positioned to lead,” the letter said.

To shield AI firms, the Trump administration is mulling some tariff relief, but sources told Politico it would likely be tied to foreign firms investing in US chip manufacturing, like Taiwan Semiconductor Manufacturing Co. Apparently, that’s the approach Commerce Secretary Howard Lutnick favors most.

Perhaps mindful of the data center development timeline—and possibly the upcoming holiday season, as Trump previously has exempted goods from tariffs to avoid consumer backlash that negatively impacted his approval ratings—the administration may impose tariffs in phases to avoid the worst impacts hitting all at once.

Industry talks with Trump turn “negative”

The global data center buildout already has the tech industry broadly scrambling for access to high-end semiconductors, which are forecasted to remain in short supply well into 2027. Just yesterday, Gartner forecasted that due to the shortage that’s driving price increases, global semiconductor revenue is expected to reach $1.6 trillion in 2026—much sooner than expected.

Economists expect that tariffs would only further increase prices for chips, which Politico reported could “hammer US chip designers such as Nvidia and Advanced Micro Devices, which rely on overseas manufacturers to produce their chips.” Tariffs could also hurt companies like Apple, which competes with foreign rivals overseas that wouldn’t have to deal with the tariffs. Chinese firms could benefit, Politico suggested, as chip suppliers potentially avoid tariffs by increasing business in China.

Politico’s sources confirmed that the tech industry is so panicked by the risk of semiconductor tariffs that it “launched a lobbying blitz” to guarantee that data centers at the very least would be exempted.