Former President Donald Trump's global tariff policies are posing significant challenges to his stated ambitions of fostering domestic chip production in the United States. These tariffs are also undermining the country's aspirations to lead the world in developing cutting-edge artificial intelligence technologies.

According to industry insiders, including technology executives, supply chain specialists, and market analysts, the president's escalating trade war could negatively impact the growth of American computing capabilities. This is largely due to the increased costs associated with constructing semiconductor fabrication facilities and artificial intelligence (AI) data centers within the U.S.

The concerns from the tech sector are centered around the potential unintended consequences of Trump's push for greater domestic manufacturing of chips and electronics. Experts warn that this initiative may inadvertently stifle progress for prominent firms such as OpenAI, Google, and Microsoft, as they strive to outpace their Chinese counterparts in the race to develop advanced AI technologies.

Sravan Kundojjala, a consultant from SemiAnalysis, pointed out that the economic uncertainty generated by the tariffs could become a significant barrier to achieving American dominance in the AI sector. The economic uncertainty induced by Trump tariffs could become the single largest barrier to American AI supremacy, Kundojjala remarked.

Major technology firms including Microsoft, Google, Amazon, and Meta have collectively committed to investing an astounding $300 billion in AI-related computing infrastructure alone by the year 2025. This ambitious investment aims to bolster the technological framework necessary for AI development.

Furthermore, Taiwan Semiconductor Manufacturing Company (TSMC) has made headlines by pledging $100 billion to enhance chip manufacturing capabilities in the U.S., a move that aligns with these tech giants' grand ambitions. However, industry leaders caution that these initiatives are fraught with uncertainty and could face significant disruptions as the tariffs affect the intricate global supply chains that are essential for powering large-scale AI computing projects.

A participant in the development of Stargate, a monumental $500 billion data center project spearheaded by OpenAI, SoftBank, and Oracle, expressed concern over these potential delays. I am much more worried about the impact on a single component in a given data center that may be delayed now because some overseas supplier is making a decision about their business, the individual explained. These are fairly complex builds which can be delayed because of a switch for the fans.

While semiconductors and related chipmaking equipment were initially exempted from Trump's now-suspended reciprocal tariffs targeting multiple U.S. trading partners, analysts indicate that the existing tariff regimewhich includes hefty 145 percent duties on goods imported from Chinawill still escalate the expenses associated with constructing and financing AI data centers and fabrication plants in the U.S.

According to Altana, a research firm specializing in global supply chains, the tariffs on Chinese imports alone could impose an additional $11 billion in annual costs on American data center developers. This financial burden could drastically alter the competitive landscape for U.S. companies.

In light of these challenges, the U.S. government announced an investigation this week into the national security implications of importing semiconductors and related manufacturing equipment. This inquiry, labeled as a Section 232 investigation, could extend up to 270 days and might lead to even more stringent regulations for the industry. Trump has previously utilized Section 232 powers to impose 25 percent tariffs on key sectors such as steel, aluminum, and automotive manufacturing.

In a recent post on social media, Trump declared, NOBODY is getting off the hook, asserting that his administration would closely examine semiconductors and the entirety of the electronics supply chain.

However, experts caution that introducing new duties on semiconductor imports could prove problematic, as many chips enter the U.S. already integrated into various products, including smartphones and laptops. This also includes high-performance graphics processing units (GPUs) that are critical for large-scale AI operations, used extensively by cloud service providers like Amazon and Microsoft.

Mohammad Ahmad, the CEO of Z2Data, a supply chain data analysis platform, elaborated on this complex process, noting that most AI GPUs arrive in the U.S. as parts of servers that undergo assembly through multi-step processes across multiple countries. The chips themselves are primarily manufactured in Taiwan and South Korea, often sent to Southeast Asian nations like Malaysia and the Philippines for packaging and testing before being shipped back to Taiwan or to Mexico for circuit board assembly.

Even if the GPUs themselves were exempt from tariffs, Ahmad warned that the costs incurred due to tariffs on components would still significantly impact pricing within the U.S. The number of product categories is so vast, and the smallest component can bring your supply chain down, he cautioned.

Kundojjala from SemiAnalysis added that even with proposed tariffs of 32 percent on imports from Taiwan, producing semiconductors domestically would still incur higher costs because tariffs inflate prices for essential manufacturing tools and materials. The threat of the U.S. kneecapping itself in the ability to rebuild onshore manufacturing is real, he stated. It will be cheaper to build manufacturing capacity outside the U.S., while companies with the highest share of U.S. manufacturing stand to lose the most.

A senior executive at a Taiwanese chip design firm that supplies Amazon also voiced concerns, indicating that if significant tariffs are imposed on their sector, U.S. customers would bear the financial burden for extended periods. Amazons first reaction is to go to their supplier and say, you guys produce this in Taiwan, and that creates extra cost for me, so reduce your prices, the executive noted. But we will not lower our pricesif we do, well be screwed by the U.S. government because we would be frustrating their policy of forcing people to make all chips in America.

Geoffrey Gertz, a senior fellow at the Center for a New American Security in Washington, emphasized that the Trump administration has the capacity to mitigate risks to the AI industry following the Section 232 investigation by employing a broader range of policy tools. The question is whether this process ends quickly with a 25 percent tariff on chips, or whether this will be a more creative policy process that considers a broader range of potential outcomes, he concluded.

Additional reporting for this piece was contributed by Melissa Heikkil in London.