Trump’s Tariffs Are Sabotaging America’s A.I. Leadership

The U.S. is currently the world leader in artificial intelligence, but new tariffs announced by President Donald Trump could threaten that leadership. Earlier this spring, the president introduced sweeping new import tariffs from key trading partners. The goal is to bring manufacturing back to the U.S. and protect American jobs. However, its adverse effects are already being felt in the tech sector, which is worrying. According to analysts, one industry —artificial intelligence— might potentially take the harshest blow.

A.I. companies have yet to determine if Trump tariffs are about to decimate them, and the fact that no one has a clear answer is sending the tech industry into confusion. The key issue is whether GPUs, the graphics processing units, essential to A.I., computing and many other sectors, will be exempted from Trump’s sweeping tariffs. The A.I. industry’s infrastructure depends on a hyper-global supply chain—chips, cooling systems and servers—nearly every component coming from overseas. Now, thanks to tariffs as high as 32 percent on Taiwanese imports, building A.I. in the U.S. could become drastically more expensive. 

The tech markets have already flinched hard. Nvidia (NVDA), TSMC and the Magnificent Seven also faced decline following the announcement. The message from Wall Street is clear: these tariffs, even temporary, are a direct threat to the A.I. sector. Even as the stock market tumbles and companies scramble for clarity, the real question remains: Are these tariffs truly protecting American industries, or are they hurting the innovation that drives them? 

Are we sacrificing innovation on the altar of tariffs? 

It doesn’t help that the administration has done almost nothing to clarify its intent. Chips imported as standalone components may be safe, but most don’t arrive that way. They come embedded in servers, which are fairly in tariffs’ crosshairs. A single A.I. GPU costs tens of thousands of dollars, and A.I. labs need thousands. Slapping a 30 percent tariff on those machines is a costly bet. AllianceBernstein analysts also voiced similar concerns. There’s open speculation inside tech companies that Trump will offer exemptions to companies he favors, just like he did for Apple in his first term. But that’s not policy. That’s patronage. 

The broader economic effects could be devastating. The tariffs affect A.I. infrastructure, raw materials, cooling systems, construction supplies and even rare earth materials. A.I. companies are already mulling whether it might be cheaper to build data centers abroad. A.I. data centers, powering everything from ChatGPT to Meta’s new Llama models, are hugely expensive to build. With tariffs slapped on top, the cost of building those data centers in the U.S. could rise so fast that companies might have to build them elsewhere. Some already are. 

So let’s get this straight: In the name of “America First,” Trump is pushing a narrative that it’s cheaper to build the future of A.I. outside the U.S. The irony here is painful. These tariffs were meant to protect American technological leadership. Instead, they push the next-generation A.I. breakthrough overseas, just as China doubles down on its domestic compute investments. 

The impact of tariffs on the A.I. industry

While A.I. chips imported as standalone products are largely exempt, many servers and essential datacenter components will face higher tariffs that could increase the cost of building A.I. infrastructure. According to CBRE estimates, the object tariffs will boost construction costs for commercial projects—including A.I. data centers—by 3 to 5 percent as higher steel, aluminum and copper prices feed directly into building budgets. If an electronics exemption on Chinese imports is rolled back, data-center equipment currently duty-free could face a 145 percent tariff. This would more than double the cost of servers, storage arrays and ancillary hardware procured from China. So, U.S. tariffs could raise A.I. development costs by hundreds of millions. This is not a soft threat. It signals a heightened risk that could break supply chains powering A.I. innovation across the next two years.

Semiconductor policy now collides directly with America’s A.I. momentum. The problem is not tariffs alone. It is a mix of capital cost spikes, talent shortages, regulatory fog and hardware bottlenecks. Without decisive action, Washington’s A.I. strategy is at risk, and Washington might fall behind its global competitors within the next 12 to 18 months. Tariffs are only one layer of policy risk. Export controls, investment restrictions and the possibility of counter-retaliation by trading partners add to the instability. Large-scale A.I. infrastructure is capital-intensive. Training a frontier A.I. model today can cost upwards of $100 million. Data centers require billions in investment to meet demand. Tariff-driven hardware inflation raises the total project cost. Microsoft (MSFT) has already shelved two gigawatts of new data centers, while Amazon (AMZN) has delayed key lease deals.

What to expect

Of course, there’s still a chance the administration walks this back—or at least sacrifices the rules. But even if an exemption comes through, the damage has been done. Companies are now factoring Trump’s unpredictability into their long-term decisions. The smart money will go where policy is stable and costs are clear.  Artificial intelligence is too important to America’s economy and national security to be jerked around by tariff roulette. If the U.S. wants to stay ahead, it needs smart, forward-looking industrial policy—not slogans, not guesswork. 

And let’s not forget: China is watching. While the U.S. is busy sabotaging its own A.I. momentum, China is investing, scaling and integrating artificial intelligence into every facet of its economy. The current issue is more than just a trade dispute—it’s about the future of U.S. technology. These tariffs aren’t merely a tax on foreign goods; they are a tax on the future of the U.S. tech sector. If the U.S. wants to remain competitive, it must rethink its approach to global trade. Tariffs are not a solution; policies that support growth are. 

Ahmad Shadid is the founder of O.XYZ, an A.I. and Web3 platform. Previously, he built and led a Web3 infrastructure company valued at $4.5 billion. He writes on the intersection of technology, policy and innovation.