Since returning to office in early 2025, Trump has imposed sweeping tariffs that have disrupted nearly every sector of the global economy. Now they’ve found an unlikely new target: artificial intelligence, an industry the president has vowed to protect.
According to new reporting from Politico, the Trump administration is discussing a round of tariffs on semiconductors, despite objections from Silicon Valley.
Citing anonymous sources, Politico reports that the Trump administration is considering tariffs that would impact not just the flow of foreign-made chips into the country but also the countless Silicon Valley products that rely on these chips. Data centers are one obvious item, but it will also likely hit consumer electronics like laptops, which are already suffering from notable price hikes due to a global supply crunch on memory chips. That supply crunch has been driven by a surge in demand for AI, leading to an unprecedented AI infrastructure buildout that has eaten up chipmaking capacity.
The AI-driven data center buildout in the United States, and much of the rest of the world, depends on crucial chips and parts coming from a handful of Asian companies, chief among them the Taiwanese semiconductor giant Taiwan Semiconductor Manufacturing Company, better known as TSMC. The company accounts for 73% of the global semiconductor foundry market share, and even supplies American leader Nvidia with processors.
President Trump has made “winning the AI race” one of his administration’s top priorities. In practice, that has meant clearing away virtually anything standing between the AI industry and its goal of putting a data center on every street corner. But the President has another top priority that, in this instance especially, is colliding with the other: to bring chip manufacturing stateside. In the pursuit of this goal, the Administration struck multibillion-dollar investment deals with foundry giants like TSMC and has taken government stakes in once-glorified but now-struggling chipmakers like Intel.
Trump’s commerce chief Howard Lutnick is reportedly gunning for tariffs that would allow foreign companies to evade these tariffs, but only if they invest in U.S. chip manufacturing capacity. Under Lutnick’s vision, the amount of chips that can enter duty-free will reportedly be based on how big an investment the company makes.
That arrangement might work better in theory than practice, though, experts warn. Building a foundry business from scratch is already a daunting task, particularly given the limited infrastructure and expertise available in the United States. It is likely to cost American businesses an absurd amount of time and money to bring chip manufacturing to the capacity that is needed to be the majority supplier of the hefty infrastructure buildout goals laid out by the AI industry, while also making sure other tech and adjacent sectors that rely on these chips can get enough supply to keep their businesses running. The timeline is in years, or even decades, according to some experts and tech industry insiders who spoke to Politico.
Until then, American tech companies will have to continue to depend on a flow of chips from abroad. The American chipmaking industry is unlikely to scale up fast enough to make up for lost supply if that flow gets hindered by Trump’s potential tariffs, potentially causing chaos not just for the AI industry but also across other sectors that rely equally heavily on semiconductors, like banking, automotive and even healthcare.
“This may be the single dumbest way imaginable to pursue American dominance in AI,” an anonymous tech lobbyist and former Trump official told Politico.
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