Deep View: What Trump’s tariffs mean for AI

Posted on April 6, 2025 by michelleclarke2015
 
What Trump’s tariffs mean for AI 
Source: Created with AI by The Deep View

On Wednesday night, President Donald Trump unveiled a sweeping list of global levies, a massive restructuring of global trade that is centered around the introduction of a 10% baseline tariff against all U.S. imports, which impacts most countries in the world.

Some countries have been singled out specifically, including China (with a 34% tariff), Vietnam (46%) and Taiwan (32%). China’s new duty will be in addition to existing tariffs against the country, which will raise its effective tariff rate to 54%. The tech sector, encompassing everything from smartphones to AI, sits in the middle of a vast global ecosystem that is heavily reliant on hardware supplies, particularly from those Asian countries that are facing the steepest levies. Technology is about to get much more expensive.

Noted tech bull Dan Ives said in a note Thursday morning that “it would be a self-inflicted Economic Armageddon” if the tariffs remain in place at these levels. “We have to assume this is the start of a negotiation and these rates will not hold … stocks will sell-off massively but ultimately our view is these numbers would throw the U.S. into a clear recession and cause stagflation almost immediately.” 

The baseline tariffs will take effect on April 5, with the individual tariffs taking effect on April 9. 

Deepwater Management’s Gene Munster said that “the AI trade isn’t over — it’s just paused.” What it all means for AI: Let’s start with the AI trade that, as Munster noted, is now “paused.” Here, I’m referring to the AI-related, publicly-traded Big Tech names — largely the Magnificent Seven group of stocks — that so successfully pushed markets higher in 2023 and 2024, all on excitement over the potential of AI. Well, that theme hasn’t quite played out this year, with investors finally responding to persistently high valuations and unclear returns on investment. Markets have been edging lower, led by pullbacks among Big Tech.

Even in light of all that, stocks plumetted on Thursday, with the Dow dropping 1,600 points, the S&P 500 falling 5% and the tech-heavy Nasdaq falling 6% (the Nasdaq is now down roughly 14% for the year). Big Tech was deep in the red, with Microsoft and Google avoiding the worst of it, falling between 2% and 4%, respectively. Apple led the sell-off, falling more than 9%, while Nvidia fell more than 7% and Amazon fell nearly 9%.  Collectively, the seven stocks are looking at nearly $1 trillion in market cap losses. 

Why? The supply chain: All these names are reliant on foreign imports. The bits and pieces that make up Apple’s devices are assembled in a number of countries, including China. The chips that power these devices are fabricated by Taiwan Semiconductor Manufacturing Company, or TSMC, a leading chip fabricator that does most of its production in … Taiwan (32% tariff). Indeed, TSMC is something that all the Magnificent Seven have in common; Nvidia’s chips — which fill the data centers of every Big Tech hyperscaler — are fabricated by TSMC. 

Now, according to a White House fact sheet, semiconductors will be exempt from Trump’s reciprocal tariffs, but the details there remain unclear. According to the fact sheet, energy and “certain minerals” that are not available in the U.S. will additionally be exempt; again, the details are unclear. 

Added to this mix of bad news and not awful news is the fact that the semicodunctor tariffs, as CNBC noted, haven’t been quashed; they’ll simply be addressed at a later date. 

All the big semiconductor companies — TSMC, Broadcom, Micron — fell hard Thursday. “I do think that there could be some short-term impacts,” AMD CEO Lisa Su told Yahoo Finance Monday. “I think it’s too early to say what the longer-term impacts are. I think we have to look at how things play out over the next number of months.”AMD’s chips are also manufactured by TSMC.

D.A. Davidson analyst Gil Luria told Reuters that “there’s no doubt that the equipment that goes into data centers will become significantly more expensive,” something that could delay the ambitious infrastructure plans — such as Project Stargate — touted by Trump and being advanced by major infrastructure players. “Most American software and hardware will get expensive and open up emerging markets to develop self reliance supply chains,” AI expert Dr. Srinivas Mukkamala told me. 

Indeed, Bloomberg reported Thursday that Microsoft has pulled back on data center projects around the world. 

What it means for adoption: As a technology, generative AI is early in its lifecycle. Adoption is a key marker for growth, and adoption hasn’t been easy; corporate spending on AI projects has been on a somewhat steady rise, but the tech is far from becoming widespread (something the tech companies need if they want to recoup their investments into costly AI infrastructure). The tariffs, however, could create “demand destruction, which means cutbacks on software and cloud spending,” Ben Barringer, a global technology analyst at Quilter Cheviot, told Reuters. Ives said that the “sheer uncertainty” from the tariff announcement could “cause some IT budgets to freeze and C-level management to figure out their own supply chain and how to navigate this near-term Category 5 hurricane.” 

This all shortly follows a Goldman Sachs report that contends the current situation is not quite the same as the dot-com bubble that burst 25 years ago, since valuations aren’t as extreme and fundamentals are stronger. Still, it is a hype cycle where “the returns on capital invested by the innovators are typically overstated.”
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About michelleclarke2015

Life event that changes all: Horse riding accident in Zimbabwe in 1993, a fractured skull et al including bipolar anxiety, chronic fatigue …. co-morbidities (Nietzche 'He who has the reason why can deal with any how' details my health history from 1993 to date). 17th 2017 August operation for breast cancer (no indications just an appointment came from BreastCheck through the Post). Trinity College Dublin Business Economics and Social Studies (but no degree) 1997-2003; UCD 1997/1998 night classes) essays, projects, writings. Trinity Horizon Programme 1997/98 (Centre for Women Studies Trinity College Dublin/St. Patrick's Foundation (Professor McKeon) EU Horizon funded: research study of 15 women (I was one of this group and it became the cornerstone of my journey to now 2017) over 9 mth period diagnosed with depression and their reintegration into society, with special emphasis on work, arts, further education; Notes from time at Trinity Horizon Project 1997/98; Articles written for Irishhealth.com 2003/2004; St Patricks Foundation monthly lecture notes for a specific period in time; Selection of Poetry including poems written by people I know; Quotations 1998-2017; other writings mainly with theme of social justice under the heading Citizen Journalism Ireland. Letters written to friends about life in Zimbabwe; Family history including Michael Comyn KC, my grandfather, my grandmother's family, the O'Donnellan ffrench Blake-Forsters; Moral wrong: An acrimonious divorce but the real injustice was the Catholic Church granting an annulment – you can read it and make your own judgment, I have mine. Topics I have written about include annual Brain Awareness week, Mashonaland Irish Associataion in Zimbabwe, Suicide (a life sentence to those left behind); Nostalgia: Tara Hill, Co. Meath.
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