Trump semiconductor tariffs could cost US $90B, delay AI buildout

The Trump administration is preparing to impose sweeping semiconductor tariffs that could fundamentally undermine its stated goal of establishing US dominance in artificial intelligence, according to industry estimates and sources familiar with the plans.

Politico reported Thursday that the tariffs, expected within weeks or months, could extend beyond chips themselves to encompass downstream products including gaming consoles and data center servers. Eight sources granted anonymity described a framework still in flux, with Commerce Secretary Howard Lutnick favoring an approach that ties tariff relief to foreign investment in US chip manufacturing.

The economic calculus

The Computer and Communications Industry Association estimated in June that taxing both semiconductors and products containing them would cost the US economy approximately $90 billion annually in GDP losses. The group projects that roughly 20 percent of data center projects planned through 2030 would face delays or cancellation.

The timing creates a particularly acute problem. Global semiconductor revenue is forecast to reach $1.6 trillion in 2026 as high-end chips remain in short supply through 2027. Data centers racing to build AI infrastructure need access to these chips now, but domestic manufacturing capacity won't materialize for years.

"This may be the single dumbest way imaginable to pursue American dominance in AI," a tech official from a major industry group told Politico. "It's like kneecapping yourself at the starting line."

Why it matters

The proposed tariff structure exposes a fundamental contradiction in US technology policy: taxing the imports that American companies need today to build AI infrastructure won't accelerate domestic chip production that won't come online for years. The policy risks handing competitive advantages to Chinese firms while raising costs for US consumers on everyday devices from smartphones to vehicles—potentially slowing AI adoption at the precise moment the administration seeks to accelerate it.

Industry pushback intensifies

Twenty trade groups warned Treasury Secretary Scott Bessent in May that broad semiconductor tariffs would increase prices on consumer devices, delay product launches featuring new AI technologies, and potentially drive data center development outside the US. The groups noted that consumer devices serve as "the primary interface through which Americans access AI-powered tools."

The tech industry has launched an intensive lobbying effort seeking exemptions, particularly for data centers. However, sources told Politico that recent discussions with administration officials have "trended in a negative direction."

Lutnick reportedly plans to implement a system allowing duty-free entry for a set volume of chips, with allowances tied to companies' commitments to US production. Critics warn this volume wouldn't cover the needs of major cloud providers alone, much less the broader industry.

"The math literally just does not work," one tech representative said, noting that the proposed duty-free volumes wouldn't match the chips US companies require—chips that cannot currently be purchased domestically because manufacturing capacity doesn't yet exist.

What the industry wants

Trade groups have proposed several alternatives if tariffs prove inevitable: exempting semiconductors used in AI servers, lowering tariff rates from 25 percent to 10 percent, excluding products with minimal chip content, and avoiding double taxation on both semiconductors and the products containing them.

The groups argue that policy should instead focus on expanding domestic capacity through accelerated permitting, infrastructure deployment, and workforce development rather than imposing what they characterize as economy-wide costs on innovation.

Earlier this year, Trump imposed narrow semiconductor tariffs that specifically exempted data centers. US Trade Representative Jamieson Greer said in May that timing and amount matter for semiconductor tariffs, and that the government wanted to allow companies to import chips during a "reshoring phase." What shifted the administration's position remains unclear, though a Commerce Department report submitted July 1 likely factors into current deliberations.

These details were first reported by Politico and Ars Technica.