On Wednesday, former President Donald Trump announced a significant 25% tariff on select artificial intelligence (AI) chips, including the Nvidia H200 AI processor and the AMD MI325X semiconductor. This move comes as part of a new national security order issued by the White House, emphasizing a growing concern over U.S. dependence on foreign chip manufacturing.
The proclamation stems from a nine-month investigation conducted under Section 232 of the Trade Expansion Act of 1962. It specifically targets high-end semiconductors that meet defined performance benchmarks, as well as devices that utilize these chips. The intent behind this tariff is to encourage U.S. chipmakers to enhance domestic production and reduce reliance on overseas supply chains, particularly from Taiwan, a major player in the semiconductor industry.
According to the White House, the U.S. currently manufactures only about 10% of the chips it requires, creating a “significant economic and national security risk.” This statistic highlights the urgency for the U.S. to bolster its semiconductor industry, which plays a crucial role in everything from electronics to national defense.
In a move to alleviate some concerns, the White House clarified that the tariffs will be narrowly focused and will not apply to chips and devices imported for U.S. data centers, which are heavy users of AI technology. Additionally, startups, non-datacenter consumer applications, and public sector applications will also be exempt. Commerce Secretary Howard Lutnick has the authority to grant further exemptions, should he see fit.
Following the tariff announcement, shares of major tech companies such as Nvidia, AMD, and Qualcomm experienced slight declines in after-hours trading. This immediate market reaction underscores the uncertainty these tariffs bring to the tech landscape.
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In December, Trump indicated plans to impose tariffs on Chinese semiconductor imports due to Beijing’s “unreasonable” quest for dominance in this critical sector. However, those actions were postponed until June 2027, indicating a strategic, albeit cautious, approach to trade relations with China.
The Trump administration’s recent actions derive from a year-long “Section 301” investigation initiated under former President Biden, which scrutinized China’s exports of older technology chips. While questions remain about which products will be affected by these tariffs and potential exemptions for companies and countries, Wednesday’s announcement reflects a more measured approach towards chip imports than initially anticipated.
Interestingly, Trump previously allowed Nvidia to sell H200 chips to China, contingent upon a portion of sales being transferred to the U.S. This arrangement raised legal concerns regarding constitutional restrictions on taxing exports.
Moreover, the administration mandated that chips headed for China must first travel through the United States for testing by a third-party lab. Upon entering the U.S., these chips will be subject to the newly announced tariffs.
Nvidia has not yet responded to requests for comment, but AMD confirmed their adherence to all U.S. export control laws and policies, indicating their compliance amidst these shifting regulations.
Trump has previously employed a range of tariffs aimed at revitalizing U.S. manufacturing. Just last September, he announced sweeping new import duties, including a staggering 100% tax on branded drugs and a 25% levy on heavy-duty trucks. Such actions signify a renewed trend of trade uncertainties following a relatively calm period.
Additionally, in April, the Trump administration initiated investigations into semiconductor and pharmaceutical imports, deeming the reliance on foreign production a national security concern. Despite well-known U.S. companies like Nvidia, AMD, and Intel producing widely utilized chips, the majority of manufacturing remains overseas, primarily in facilities such as the Taiwan Semiconductor Manufacturing Company (TSMC).
Looking ahead, Trump may consider imposing more extensive tariffs on semiconductor imports and related products to further incentivize domestic chip manufacturing. Importantly, any 25% tariffs imposed will not stack with existing tariffs established under other Section 232 orders, which should alleviate some concerns for manufacturers facing multiple layers of duties on their products.
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