Barely 24 hours after President Donald Trump levied 25% tariffs against Mexico and Canada, and doubled China’s toll to 20%, the tech industry is feeling the pain amid a massive selloff in Asian markets as industry leaders increasingly grapple with a potential drop in IT spending, rising consumer costs, supply-chain mayhem and ramped-up construction of U.S. manufacturing facilities.
Asian markets felt severe pain swiftly.
Shares of NVIDIA Corp., which is greatly dependent on manufacturing plants in Taiwan, plunged 9% Monday on news of the tariff hikes. SoftBank’s stock slid 6%, and company CEO Masyoshi Son said he plans to borrow $16 billion to invest in artificial intelligence (AI). Alibaba and Kingsoft Cloud shares suffered in overnight trading.
The semiconductor sector, and IT spending in general, are also expected to take a short-term hit, according to economists and researchers. Market researcher IDC expects a decline in Canada’s gross domestic product growth reflected in less IT spending and fewer new projects. “They will not achieve the administration’s stated goal of revitalizing American manufacturing,” said Stephen Ezell, ITIF’s vice president of global innovation policy.
In his address to Congress, President Trump acknowledged economic pain to come, even as Mexico and Canada responded with their own tariffs, joining China.
Tariffs will drive up the cost of raw materials for the semiconductor industry, as well as the assembly, testing and packaging of tech products, leading to higher prices for American consumers, Christine McDaniel, senior research fellow at the Mercatus Center, told Bloomberg.
“Regardless of how long it lasts, U.S. consumers find themselves in the middle of a geopolitical fight, and though companies and countries have had plenty of time to prepare for this inevitability, it doesn’t help that the three countries targeted — Mexico, Canada and China — account for more than 40% of all U.S. imports,” Greg Zakowicz, senior ecommerce expert at Omnisend, said in an email.
Under a wider lens, there is a general belief tariffs will increase inflation and disrupt interconnected global supply chains for high-tech goods, including automobiles, electronics and medical devices, increasing costs for American consumers and hindering U.S. economic growth.
“As tariffs continue to be in the global spotlight, businesses across industries, including tech, are grappling with growing uncertainty in their supply chains. With the measures that went into effect [Tuesday] morning, companies must lean into technology to mitigate risk and enhance resilience in an unpredictable trade environment,” Darcy MacClaren, chief revenue officer at SAP Digital Supply Chain, said in an email.
“Geopolitical changes may also further reshape supply chains and regulatory landscapes, and in the long term, businesses may seek to diversify their suppliers and invest in supply chain solutions that integrate logistics data and supplier networks,” MacClaren added.
“The U.S. is aggressively pushing tariffs, which will create a lot of pain for China, but China can quickly strike back by devaluing its currency and weaponizing its supply chain, particularly of rare minerals,” Ted Krantz, CEO of interos.ai, said in an email. “While the U.S. can block access to its consumer market, China can withhold what it sells. It feels like a pretty even heavyweight match, and the real question is how global supply chains will absorb the impact.”
Companies like Apple Inc., TSMC and Intel Corp. are attempting to ease the pain by ramping up manufacturing facilities in the U.S. with multibillion-dollar projects that reduce their dependence on foreign markets. Last year, NVIDIA CEO Jensen Huang told Goldman Sachs CEO David Solomon that, should NVIDIA’s access to Taiwanese components be disrupted, “we should be able to pick up and fab it somewhere else” though not at the same level of “outperformance or cost.”
Ironically, the one immune area of tech could be AI.
As Chinese AI startup DeepSeek has proved recently, the cost of training and maintaining models decreases periodically as technical processes get more efficient. At the same time, demand for AI remains high because of cost elasticity, affording companies comfortable operating margins that can weather a dent to profits.
Still, some analysts caution tariffs could mildly hamper American AI leaders if competitors in France and Japan are able to buy chips tariff-free.
