A Conflict Between Old Economics and New Technologies
There’s no doubt that President Donald Trump’s latest wave of tariffs has sparked global concern. And it’s safe to say it’s impact on artificial intelligence sector is adverse and quite complex. On one hand Trump aims to restore U.S. manufacturing with an universal 10% tariffs and a 60% levy on Chinese goods. On the other hand some economists and tech leaders warn that these policies could hugely undermine America’s momentum in the AI race.
AI Relies Hugely on Global Trade and Tariffs Will Break That Chain
AI systems don’t operate on talent alone. They need huge amounts of infrastructure, and most of which is imported. Such as cloud credits from AWS or Azure, GPUs from Nvidia, AI chips from Taiwan, and cooling systems as well as power units for datacenters. Trump’s recent updates on tariffs would directly increase costs on all these critical imports. Which will make it more expensive to build and run AI datacenters in the U.S itself.
Chris Miller, author of Chip War, explains that even though AI chips may be exempt from tariffs if imported as raw parts, most chips arrive inside products like servers, which aren’t exempted from tariffs. This distinction could drive up costs by 20–30% for startups and enterprises alike, according to MSN.
The Impact? Datacenters May Go Abroad And With Them, AI Leadership
Higher infrastructure costs don’t just dent and affect profits, in fact they may drive companies to build datacenters in cheaper cost locations abroad. As Lucas Hansen from the Civic AI explains this, tariffs now will add another reason for companies to set up their shop in regions with lower energy and hardware costs. That shift could definitely weaken America’s AI dominance.
Market Reactions on Trump’s Tariffs on AI
Following Trump’s announcement, AI company stocks have significantly dipped, showing just how tightly global trade and AI progress are connected. Investors fear that increasing infrastructure costs, supply chain disruptions, and uncertainty of the long-term policy could disturb growth in the AI sector. Trump’s shifting stance on AI regulation adds another layer of complexity to the economic challenges posed by tariffs.
University Funding Cuts and Student Visa Revocations Raises More Concerns
Another area of concern would be the administration has paused funding for top AI research universities such as Harvard and Princeton over political concerns. Above all, it has revoked hundreds of visas from foreign students. Many of them are PhD candidates in AI and are important to U.S. research pipelines.
Removing the CHIPS Act Could Undo AI Progress
One more major misstep? It’s Trump’s call to remove the CHIPS and Science Act, which was a bipartisan law passed in 2022. This law authorized $300 billion for semiconductor manufacturing and research. Many experts say that this law laid down the foundation for huge investments. Even the $100 billion deal with Taiwan’s TSMC to build five U.S. chip factories. Scrapping it now would undo years of progress and discourage future innovation.
Martin Chorzempa from the Peterson Institute points that none of these advancements would have happened without the CHIPS Act. And repealing the same could cripple U.S. competitiveness in semiconductors and AI.
AI Will Still Get Cheaper At least For Now
Despite all this, AI usage may still get cheaper. According to Epoch AI, the cost of running a given AI model is dropping at a rate of 40x annually. All thanks to better software and hardware efficiency. So, even if building AI becomes more expensive, the consumers may not feel it immediately. However, that progress could come to a halt if infrastructure investment slows due to tariffs and funding cuts.
