Opinion by: Ahmad Shadid of O.xyz
Semiconductors have scored a rare exemption from the aggressive tariffs of US president’s tariffs, but relief is symbolic at the best. Most semiconductors enter the US who is emerged on servers, GPUs, laptops, and smartphones.
The finished goods remain heavy tariffs, some with duties reach up to 49%. The exemption looks great political but delivers a little practical benefit. Nvidia DGX systems, which are essential for training in advanced AI models, do not fall under exempted HTS codes. Nvidia can pay effective tariffs close to 40% of these essential ingredients. Such costs threaten to stop critical AI infrastructure projects across the country.
Semiconductor tariffs can compromise the purpose of the Chips Act. The law promises ten -ten billion dollars in subsidies to support domestic chip production. But advanced lithography machines – basic equipment from countries such as the Netherlands and Japan – faced 20% –24% tariffs. In particular, tariffs designed to boost American production increase the cost of essential manufacturing equipment.
The impact of new tariffs slows down the development of critical supply chains – such as generative AIs and large language models gain momentum in sectors such as finance and defense. Any delay or cost increase today can dull the advantage of American technology.
Indirect costs weaken exceptions for AI
Modern semiconductor supply chains are universal and highly integrated. An exemption on raw silicon means none when servers, GPUs and other finished products are faced with steep tariffs. Tariffs do not directly drop costs, removing any competitive advantage from domestic manufacturing.
Indirect tariff costs hit high-end systems that are not equivalent to difficult. The effect is ripples by training the AI model, expanding data center and major infrastructure projects, significantly slowing down the industry momentum.
Tariff Impasse has stopped investing
So far, it is clear that the US president’s tariff plan does not comply with any conventional economic trends or calculated approach. The uncertain tariff situation attaches investment decisions throughout the technology sector. Companies require unpredictable costs to justify large capital expenditure. Continuous tariff volatility prevents them from producing resources to new data centers and manufacturing lines.
This reflects the chaos of the supply chain of 2020. At that time, the uncertainty caused a massive cancellation of the order and slowed the industry recovery for many years. If the tariff ambiguity continues, we will see similar cancellation waves in 2025. It will further compound existing inventory and revenue issues in the semiconductor sector.
Domestic production is not best
The border argument for these tariffs is that they intended to boost domestic production. However, they do a little, to encourage real domestic semiconductor production. Despite subsidies under the Chips Act, most US semiconductor companies still rely on international foundries for manufacturing. Instead, they face rising equipment and operating costs.
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The idea that tariffs promote domestic production ignore the reality of global semiconductor labor. Costs rise throughout the board, putting American companies in a disadvantage rather than offering protection.
AI projects are faced with higher risk
Blockchain and crypto sectors, especially AI -driven projects, also felt pinch. The projects depend on GPUs and high performance servers for mining, verifying the transactions and operation of decentralized AI calculation. Increasing hardware costs directly affect profitability and growth, potentially surprising changes in blockchain applications.
AI development just began to take the speed in the blockchain and web3 space. The industry has seen increased interest from investors and VCs a year ago. So, budgets are still lighter. Raised costs may, however, lead to disruption. We can see innovators and developers that come out of the market. The impact of the ripple extends beyond the general technology sector and may threaten future digital economies.
Moreover, these pressures do not affect startups and smaller tech firms. Giant industries may absorb additional costs, but innovative, smaller players face existing threats. These dynamic risks are tedious innovative ideas at the level of indigenous peoples, harmful throughout the tech ecosystem.
What to expect
Semiconductors temporarily escape direct tariffs, but exemption provides a bit of benefit. Tariffs continue to hit the finished products, driving indirect costs throughout the industry. Instead of boosting domestic manufacturing, these tariffs create economic paralysis, stall critical infrastructure projects, and threaten America’s lead in AI change. The rules should recognize these facts and adjust their approach before irreversible damage is done in the future technological future.
Opinion by: Ahmad Shadid of O.xyz.
This article is for general information purposes and is not intended to be and should not be done as legal or investment advice. The views, attitudes, and opinions expressed here are unique and do not necessarily reflect or represent the views and opinions of the cointelegraph.
