President Trump announced sweeping new tariffs on imports, calling it “Liberation Day.” The baseline tariff is 10% on most imported goods, with significantly higher rates for certain countries: China (54%), Vietnam (46%), Taiwan (32%), and the EU (20%). Canada and Mexico are temporarily exempt. Additionally, a 25% tariff on imported automobiles and aluminium takes effect soon.
The recent wave US tariffs has raised questions within the tech industry, as companies across the globe reassess how they might be impacted. Whether you’re a major player in the tech space or a smaller startup, it’s useful to understand the potential effects these changes could have, both in the short and long term. Here’s a breakdown of what’s happening and why it’s important to stay informed.
1. Stock market response to tariffs
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What’s happening:
Following the tariff announcements, tech stocks saw notable declines. Major players like Apple (AAPL), Nvidia (NVDA), Amazon (AMZN), Tesla (TSLA), Meta Platforms (META), and Broadcom (AVGO) all experienced stock price drops of 5% or more. -
Why it’s relevant:
Investors are reacting to the concern that the tariffs may increase production costs. When the cost of manufacturing tech products goes up, companies may either raise prices or reduce output. Both options can potentially reduce profitability. This is important to keep an eye on for investors and companies looking to forecast financial outcomes in a shifting market. -
What might happen:
If these price increases are passed onto consumers, there could be a slowdown in demand for tech products, particularly in more price-sensitive markets. If companies can’t pass costs onto consumers or cut costs elsewhere, it could lead to margin compression and slower growth for these companies.
2. Impact on companies with operations in China
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What’s happening:
Many large tech companies, including Apple, Nvidia, and Tesla, rely on manufacturing and business operations in China. For example, Apple’s iPhones are primarily assembled in China and India. -
Why it’s relevant:
The tariffs can increase costs for companies importing goods from China, which may lead to decisions around pricing, absorbing costs, or shifting production to other countries like India or Mexico. Understanding these decisions can help stakeholders anticipate changes in product pricing and supply chain dynamics. -
What might happen:
Companies may speed up plans to diversify their supply chains, moving more manufacturing to countries outside China to mitigate tariff impacts. This could also spark an increase in automation and localised production within the US or other regions. However, these shifts could be slow and costly to implement, creating short-term disruptions in product availability and cost structures.
3. Challenges for the semiconductor industry
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What’s happening:
Semiconductors, the essential components for everything from smartphones to laptops, are largely produced in regions like Taiwan. The newly announced tariffs on goods from Taiwan, which could be as high as 32%, have raised concerns for companies like Nvidia, Intel, and AMD, who rely on these chips. -
Why it’s relevant:
Rising costs for semiconductors could make tech products more expensive. For instance, if chip prices go up, so do the prices of gadgets like computers and smartphones. This is important to keep in mind for businesses involved in tech hardware and those monitoring global supply chains. -
What might happen:
If these costs increase, companies may look into developing more local semiconductor manufacturing capabilities, possibly driving more investment in the US’s semiconductor industry. Alternatively, they may try to negotiate better terms with suppliers, but any price hikes could also lead to reduced demand for tech products. This scenario could spur innovation in chip designs or materials as companies seek cheaper alternatives.
4. The response from Chinese tech giants
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What’s happening:
Ahead of the tariffs, companies like Huawei and Tencent have made significant purchases, such as Nvidia’s H20 server chips, to secure essential components before any price increases or shortages occur. -
Why it’s relevant:
This proactive approach indicates a level of caution in the market. For companies reliant on components from global supply chains, keeping track of these shifts can help better anticipate potential delays, shortages, or cost increases in their own operations. -
What might happen:
As Chinese tech companies rush to secure parts, there could be short-term supply shortages that affect global tech availability. Furthermore, these companies may also look to diversify their supplier base, seeking out new or alternative tech sources to bypass potential supply chain bottlenecks caused by tariffs. This could lead to even greater competition in certain sectors of the tech market.
5. US tech companies increasing domestic investment
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What’s happening:
Companies like Apple, Meta, and Nvidia have been praised for their investments in domestic manufacturing plants in the US. This investment aims to reduce reliance on foreign production and mitigate the impact of tariffs. -
Why it’s relevant:
This strategy may offer companies some relief from tariffs. With the right incentives, such as tax breaks and government support, it could be a viable way to stay competitive while avoiding the extra costs associated with international manufacturing. This shift could also offer long-term benefits as companies strengthen their presence in the US market. -
What might happen:
These domestic manufacturing investments could lead to long-term benefits for the US tech industry. However, it may take several years for these plants to become fully operational. In the meantime, US companies might face higher production costs and limited output while they scale up manufacturing operations. As a result, we may see gradual price increases or shifts in supply chains as the US adapts to its new role as a more central hub for tech manufacturing.
6. UK tech industry considerations
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What’s happening:
The UK is closely monitoring these US tariff changes, as many UK tech companies rely on components like chips from the US and China. The tariffs may increase costs, making products more expensive or harder to produce. -
Why it’s relevant:
With the UK navigating post-Brexit trade negotiations, tariffs could complicate trade talks and impact pricing strategies for UK-based tech companies. However, there could also be potential for UK manufacturers to benefit if operations are moved to Europe to avoid tariffs. -
What might happen:
The UK tech sector might seek to secure trade deals within Europe or make shifts in supply chains to minimise reliance on US and Chinese suppliers. However, any changes in trade routes or regulatory environments could result in additional costs or delays, making it harder for UK companies to stay competitive.
7. The Tech Lobby’s perspective
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What’s happening:
Companies like Google and Facebook are concerned about foreign regulations, including digital services taxes, that target their businesses. They’re hopeful that tariffs might provide leverage to address these issues with foreign governments. -
Why it’s relevant:
For businesses operating across multiple countries, understanding how tariffs could be used as bargaining chips is crucial. While it’s uncertain if this strategy will work, it’s worth considering how tariffs could affect negotiations and the global business landscape. -
What might happen:
The outcome of these trade talks could potentially alter the international tax landscape for tech companies. If tariffs are used as leverage in broader negotiations, we could see international tax deals shift, with some countries offering concessions or adjustments to their own tax policies, benefiting US-based tech giants in the long run.
8. Potential EU retaliation
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What’s happening:
The European Union is reportedly considering retaliatory tariffs on US tech products, especially targeting companies like Google, Facebook, and Apple. -
Why it’s relevant:
If the EU imposes tariffs on US tech giants, it could increase costs for companies selling products in Europe, potentially disrupting the tech market. For companies with a strong presence in both the US and EU, this could impact their pricing strategies and operations in these regions. -
What might happen:
If retaliatory tariffs are implemented, tech companies may need to increase their prices in Europe, reducing demand. Alternatively, they could look for ways to streamline operations or negotiate with EU governments for exemptions. There may also be greater emphasis on localising production or securing more favourable trade agreements with EU member states.
9. Smaller tech companies and tariff challenges
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What’s happening:
Smaller tech companies are expressing concern over how the tariffs might affect them. These firms may not have the resources to quickly adapt to new tariffs or shift their supply chains. -
Why it’s relevant:
Smaller companies may face higher operating costs if their suppliers are impacted by tariffs. They might struggle to find alternative suppliers or manufacturing options that remain competitive. This could put additional pressure on businesses that lack the flexibility of larger companies. -
What might happen:
Smaller tech companies may be forced to absorb tariff-related cost increases, which could strain their finances or result in reduced product margins. Some may turn to innovation or creative solutions to offset these costs, but there could be consolidation in the market as smaller firms either close or are acquired by larger players seeking to expand their reach.
10. US semiconductor manufacturing and global supply chains
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What’s happening:
Despite the tariffs, experts believe the US will not become fully self-sufficient in semiconductor manufacturing and will continue to rely on countries like Taiwan and South Korea. -
Why it’s relevant:
While the tariffs may incentivise some domestic manufacturing, the global semiconductor supply chain will likely remain interconnected. This means that even with tariffs, costs for products like smartphones and laptops could remain high, and global supply chains may continue to experience disruptions. -
What might happen:
In the long term, the US may invest in building a more robust semiconductor ecosystem at home, but given the complex global supply chain, many companies will continue to rely on foreign manufacturers. The tariffs could accelerate investments in the US semiconductor sector, but the shift to full self-sufficiency will be gradual. In the short term, the tariffs may increase production costs for tech products, driving price hikes or supply chain delays.
Final thoughts
The newly announced US tariffs are creating ripples across the global tech landscape, from stock market reactions to manufacturing challenges and supply chain disruptions. While larger tech companies may have the resources to adjust, smaller firms may face more immediate challenges. For companies with international operations, these changes could mean reevaluating supply chains, shifting production strategies, or adjusting pricing models.
Staying informed about how these shifts may affect your business whether you’re a manufacturer, distributor, or consumer is key to navigating these changes smoothly. The tech industry is global, and even small adjustments in tariffs or trade policies can have significant long-term effects. By keeping a pulse on these developments, companies can better plan for the future and adapt their strategies accordingly.
Whitney Abigail is a Go-To-Market, Product Marketer & Emerging Tech Educator. She works with ambitious businesses to elevate their brand and to equip individuals with the knowledge needed to future-proof their career, and businesses too.
