Tariffs will increase tech prices and disrupt supply chains
The new tariffs on imported tech components will increase costs for manufacturers and, inevitably, for consumers. A 25% tariff on imports from Canada and Mexico, a 10% tariff on Chinese goods, and a 25% tariff on European tech components like semiconductors make production more expensive across the board. The semiconductor industry is particularly exposed. The U.S. depends on China and Taiwan for 80% of its 20–45nm chip foundry capacity and 70% of its 50–180nm chip production. That’s not an easy dependency to unwind.
Most companies will attempt to absorb some of the costs, but passing them on to consumers is inevitable. Expect price hikes on everything from smartphones to AI infrastructure. Some manufacturers will explore alternative sourcing in places like India and Vietnam, but setting up new supply chains isn’t instant. There’s friction in shifting production, and costs will rise before they fall.
If your business depends on hardware, especially semiconductors, it’s time to evaluate procurement strategies and consider alternative sourcing. Expect short-term cost pressure and, over time, more regionalized supply chains.
Data centers and AI infrastructure face higher costs
Data centers are the foundation of the modern economy, and they’re about to get more expensive. The tariffs on steel and aluminum, effective March 12, will drive up costs for everything from server racks to cooling systems. The knock-on effect is higher prices for cloud storage, SaaS, and AI computing power. Companies like AWS, Google Cloud, and Microsoft Azure will need to absorb these costs or pass them on to enterprise customers.
AI infrastructure is particularly exposed. The increasing demand for generative AI and machine learning models means companies are scaling their data operations aggressively. But with rising material costs and supply chain disruptions, that expansion could slow. Building a new data center already costs hundreds of millions, this just makes it worse.
If you’re leading a company reliant on AI, cloud computing, or large-scale data processing, budget accordingly. Either secure contracts before price adjustments hit or prepare for increased operational expenses. Expect some enterprises to explore on-premise infrastructure to regain control over costs.
North America’s tech supply chain faces economic strain
The North American supply chain is deeply interconnected, and these tariffs disrupt that balance. Canada supplies raw materials like nickel and cobalt, while Mexico plays a key role in component assembly, testing, and packaging. Goods often cross borders multiple times before reaching consumers. Now, with over $50 billion in added costs, the economic impact is unavoidable.
Christine McDaniel, Senior Research Fellow at the Mercatus Center, highlights how intertwined these economies are. “We have products going back and forth across the border several times before it ends in a finished product,” she notes. That means higher tariffs accumulate through each step of production. The result is either squeezed profit margins or higher prices for consumers.
The best way to respond? Audit your supply chain exposure. If your business depends on Canadian or Mexican manufacturing, understand where the biggest vulnerabilities lie. Consider whether localizing production or securing tariff-exempt suppliers could shield you from increasing costs.
Political and retaliatory motivations behind the tariffs
These tariffs are political, too. The U.S. has targeted European tech components partly in response to the EU’s regulatory stance against American tech giants. Companies like Apple, Google, and Meta have faced repeated fines from European regulators. Now, tariffs are being used as leverage.
Gil Luria, Head of Technology Research at D.A. Davidson, points out that Europe has “made a habit” of penalizing U.S. firms. That’s led to speculation that these tariffs are as much about pushing back on EU regulations as they are about reshaping supply chains. If Europe responds aggressively, the trade tensions could escalate, potentially impacting the broader tech ecosystem.
This means geopolitical risk is now an operational concern. If your business has exposure to European supply chains or regulations, expect a more volatile environment. Staying ahead means monitoring how governments respond and ensuring your business has contingency plans in place.
U.S. tech companies accelerate domestic manufacturing investments
Despite the short-term disruption, these tariffs may accelerate a trend that was already underway: bringing more tech manufacturing back to the U.S. Several major companies are making massive commitments to domestic production. TSMC has pledged $160 billion to expand U.S. data center infrastructure. Apple is investing $500 billion in U.S. manufacturing and R&D over the next four years. The Stargate Project, backed by SoftBank, OpenAI, and Oracle, is dedicating another $500 billion to AI infrastructure in the U.S.
Former President Trump has stated that even more companies are preparing to announce U.S.-based projects. If that momentum continues, it could reshape the market. While these moves require heavy upfront investment, they position U.S. tech firms to reduce dependency on foreign suppliers over the long term.
For business leaders, the implications are clear. Domestic manufacturing is becoming more strategic. If your company relies on overseas production, now is the time to consider whether a shift toward U.S.-based operations makes sense. Tariffs, supply chain disruptions, and geopolitical shifts are accelerating this transition. Those who adapt early will be in the strongest position moving forward.
Key executive takeaways
- Tech costs are rising due to tariffs: New tariffs on semiconductors, steel, and aluminum are increasing manufacturing costs, leading to higher prices for smartphones, cloud services, and AI infrastructure. Leaders should reassess procurement strategies and explore cost mitigation measures.
- Data centers and AI expansion face financial strain: Steel and aluminum tariffs are driving up infrastructure costs, impacting cloud providers and AI firms. Executives should anticipate higher operational expenses and consider securing long-term supplier agreements.
- North America’s supply chain faces disruption: Tariffs on Canada and Mexico add $50 billion in costs, affecting tech assembly, raw materials, and cross-border production. Business leaders should evaluate supply chain risks and consider regionalizing key operations.
- Trade tensions introduce geopolitical risks: Tariffs on EU tech components may escalate trade disputes, as they are partly retaliatory against European fines on U.S. tech firms. Executives must monitor regulatory shifts and prepare for potential countermeasures.
- U.S. manufacturing is accelerating: Major tech firms like Apple and TSMC are investing billions in domestic production to offset tariff risks and enhance supply chain control. Leaders should assess whether shifting operations stateside aligns with long-term strategy.
