President Donald Trump’s newest round of tariffs is set to send much of the tech industry into a tailspin.
Trump announced reciprocal tariffs on virtually every country in the world Wednesday, with a baseline set at 10%. But the rates for some Asian countries that are critical for tech supply chains are much higher. China is at 54%, combining both reciprocal levies plus the ones related to fentanyl, while Vietnam and India are at 46% and 26%, respectively.
This spells trouble for consumer electronics titans like Apple, Google and Microsoft that produce most of their smartphones, laptops and video game consoles in those countries. Amazon is also expected to take a hit.
You can expect many tech companies to ramp up their lobbying on Capitol Hill and the White House, asking for exemptions.
Apple, in particular, is in a tricky spot as the company is very dependent on its electronics business. The tech giant had been moving much of its supply chain away from China in recent years to countries like Vietnam and India as the U.S. government has taken a more muscular trade posture against Beijing.
Stock futures for all four companies tumbled Wednesday night as the tech-heavy Nasdaq index took a big hit.
But the impact of these tariffs goes beyond consumer electronics. Trump’s tariff hikes on dozens of countries will impact the broader tech economy.
Imported raw materials used for the building of data centers that power artificial intelligence are likely to go up. Trump already imposed steep tariffs on steel and aluminium imports critical for construction, and costs for other imported goods may rise.
Items used to power the telecommunications industry may also go up as many routers, modems, antennas etc. are imported from abroad.
What happens to semiconductors, which are used in everything from cars to AI model training, is unclear. Trump raised tariffs on Taiwan, the world’s leading producer, to 32%.
According to the White House, semiconductors are exempted from the reciprocal tariffs, so theoretically this wouldn’t apply to them. But there may be a special rate coming for chips as Trump has often talked about imposing high tariffs on them.
Stock futures for the Taiwan Semiconductor Manufacturing Company Limited, the leading producer of computer chips, and Nvidia, which designs AI chips, also took significant hits following the tariff news.
Tech trade groups in Washington were quick to sound alarms following the dubbed “Liberation Day” announcements.
The tariffs “threaten America’s ability to lead in key technology areas like AI and manufacturing, ” said Sean P. Murphy, executive vice president for policy at the Information Technology Industry Council.
The Consumer Technology Association took an even harsher tone.
Here’s their CEO Gary Shapiro:
“President Trump’s sweeping global and reciprocal tariffs are massive tax hikes on Americans that will drive inflation, kill jobs on Main Street, and may cause a recession for the U.S. economy. These tariffs will raise consumer prices and will force our trade partners to retaliate. Americans will become poorer because of these tariffs. This will not be a golden age – but a return to the global economic catastrophe of the Smoot-Hawley tariffs of the 1930s that will disproportionately hurt low income and hardworking Americans.”
