Semiconductors scored a rare exemption from US President Donald Trump’s aggressive reciprocal tariffs, but the relief is symbolic at best. Most semiconductors enter the US embedded in servers, GPUs, laptops, and smartphones.
The finished goods remain heavily tariffed, some with duties reaching up to 49%. The exemption looks good politically but delivers little practical benefit. Nvidia’s DGX systems, crucial for training advanced AI models, do not fall under the exempted HTS codes. Nvidia could pay effective tariffs nearing 40% on these vital components. Such costs threaten to stall critical AI infrastructure projects across the country.
Semiconductor tariffs may compromise the goal of the CHIPS Act. The act promised tens of billions of dollars in subsidies to support domestic chip manufacturing. Yet advanced lithography machines — key equipment from countries like the Netherlands and Japan — face 20%–24% tariffs. Ironically, tariffs designed to boost American production increase the cost of essential manufacturing equipment.
The effect of new tariffs is already slowing progress in critical supply chains — just as generative AI and large language models are gaining momentum across sectors like finance and defense. Any delays or cost increases now could blunt America’s technological advantage.
Indirect costs undermine exemptions for AI
Modern semiconductor supply chains are global and highly integrated. An exemption on raw silicon means nothing when servers, GPUs and other finished products face steep tariffs. Tariffs indirectly inflate costs, eliminating any competitive advantage from domestic manufacturing.
Indirect tariff costs hit high-end systems disproportionately hard. The effect ripples through AI model training, data center expansions and major infrastructure projects, significantly slowing the industry’s momentum.
Tariff impasse halts investment
So far, it’s clear that the US president’s tariff plan didn’t follow any conventional economic trends or calculated strategy. The uncertain tariff situation stalls investment decisions across the technology sector. Companies need predictable costs to justify large capital expenditures. Ongoing tariff volatility prevents them from committing resources to new data centers and manufacturing lines.
This mirrors the supply chain chaos of 2020. At that time, uncertainty caused massive order cancellations and slowed industry recovery for years. If tariff ambiguity continues, we could see similar waves of cancellations in 2025. This would further compound existing inventory and revenue issues in the semiconductor sector.
Domestic production is not optimal
The border argument for these tariffs is that they’re meant to boost domestic production. They do little, however, to encourage genuine domestic semiconductor production. Despite subsidies under the CHIPS Act, most US semiconductor companies still rely on international foundries for manufacturing. Instead, they face increased equipment and operational costs.
The idea that tariffs promote domestic production ignores the reality of global semiconductor manufacturing. Costs rise across the board, putting American companies at a disadvantage rather than offering protection.
AI projects face heightened risk
The blockchain and crypto sectors, particularly AI-driven projects, also feel the pinch. Projects depend heavily on GPUs and high-performance servers for mining, validating transactions and running decentralized AI computations. Increased hardware costs directly affect profitability and growth, potentially stalling innovation in blockchain applications.
AI developments have just started to pick up the pace in the blockchain and Web3 space. The industry saw increased interest from investors and VCs just a year ago. So, they are still on tighter budgets. Elevated costs can, however, lead to stagnation. We might see innovators and developers exiting the market. The ripple effect extends beyond the general technology sector and could threaten future digital economies.
Moreover, these cost pressures disproportionately affect startups and smaller tech firms. Industry giants can absorb additional expenses, but innovative, smaller players face existential threats. This dynamic risks stifling innovation at the grassroots level, harming the entire tech ecosystem.
What to expect
Semiconductors have momentarily escaped direct tariffs, but the exemption provides little benefit. Tariffs continue to hit finished products, driving up indirect costs across the industry. Instead of boosting domestic manufacturing, these tariffs create economic paralysis, stall critical infrastructure projects, and threaten America’s lead in AI innovation. Policymakers must acknowledge these realities and adjust their approach before irreversible damage is done to the nation’s 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 taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Sir Keir Starmer has said he “absolutely” wants Angela Rayner back in his cabinet after she resigned for failing to pay the correct amount of stamp duty.
Speaking from the G20 Summit in South Africa, the prime minister told broadcasters his former deputy is “the best example ever” of social mobility and he is still in touch with her.
Asked if she could make a comeback this side of a general election, Sir Keir said: “I’ve always said I want Angela back. Even back in September at the time I said she is going to be a big voice in the Labour movement.
“Do I want Angela back at some stage? Yes absolutely.
“I think she is the best example ever in the United Kingdom of social mobility – going from a pretty challenging childhood to being deputy prime minister of the United Kingdom. She is the story of social mobility above all other stories.”
Asked if he missed having her around, Sir Keir said: “I’m friends with Angie and I like Angie a lot and we talk a lot. We still do.
She was elected deputy Labour leader by the membership in 2020, and was made deputy prime minister then housing secretary by Sir Keir.
She resigned from all of those positions in September, after it emerged she had not paid the higher rate of stamp duty on a second home she bought in Hove, East Sussex, saving her about £40k.
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Rayner admits she didn’t pay enough tax
It followed a tearful interview with Sky’s political editor Beth Rigby about the “complex living arrangement” regarding her first home, which was sold to a trust following her divorce to provide stability for her teenage son, who has lifelong disabilities and is the sole beneficiary of the trust.
An investigation by the prime minister ethic’s watchdog found she breached the ministerial code by failing to get correct tax advice, but that she acted “with integrity”.
Ms Rayner is still a backbench MP and recently did not rule out a return to the front bench herself – telling the Daily Mirror during a visit to a care centre in her constituency that she had “not gone away”.
Other cabinet ministers have also supported her return.
During the Labour Party Conference a few weeks after she resigned, Health Secretary Wes Streeting paid tribute to her work on the Employment Rights Bill and said Labour “wants her back and needs her back”.
Chancellor Rachel Reeves has promised to “grip the cost of living” in the budget next week.
Writing in The Mirror newspaper, she acknowledged that high prices “hit ordinary families most” and that the economy “feels stuck” for too many.
But at the same time, she is expected to raise taxes when she sets out economic policies on 26 November as she seeks to bridge a multibillion-pound gap in her spending plans.
“Delivering on our promise to make people better off is not possible if we don’t get a grip on inflation,” Ms Reeves wrote in The Sunday Times.
“It is a fundamental precursor to economic growth. It is essential to make families better off and for businesses to thrive.
“There is an urgent need to ease the pressure on households now. It will require direct action by this government to get inflation under control.”
She said reforms would change the welfare system from “trapping millions of people on benefits” to one “designed to help people succeed”.
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Among the rumoured measures in the budget is an extension of the freeze on income tax thresholds, which would see more people dragged into paying tax for the first time or shifted into a higher rate as their wages go up.
However, Conservative leader Kemi Badenoch said Ms Reeves should “have the balls” to admit that such a move would breach Labour’s manifesto promise not to raise taxes on working people.
Nathan Gill’s actions were “treasonous” but people should not “besmirch everyone else at Reform”, the party’s head of policy Zia Yusuf has said.
Gill, the former leader of Reform UK in Wales, was jailed for 10 and a half years last week after he admitted accepting tens of thousands of pounds in cash to make pro-Russian statements to the media and European Parliament.
Asked by Sky News’s Sunday Morning with Trevor Phillips if the case showed the party was soft on President Vladimir Putin, Mr Yusuf said that would be an “incredibly unreasonable position to take”.
He said: “Nathan Gill, what he did was treasonous, it was horrific, it was awful. He’s been dealt with by the authorities and he deserves the sentence that he got.”
He added: “As far as we’re concerned he is ancient history. I’ve never met him, I had never heard about him until I saw he was in the newspapers. It is unreasonable to besmirch Reform and the millions of people around the country who support Nigel and support our party.”
Gill, 52, was announced as the leader of Reform UK in Wales in March 2021, but quit the party a few months later after he failed to be elected to the Senedd.
He previously led the Welsh wing of UKIP (UK Independence Party) between 2014 and 2016, then ran by Nigel Farage, and was a member of the Senedd between 2016 and 2017, as well as an MEP between 2014 and 2020.
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Gill left UKIP in 2019 to join Mr Farage’s new Brexit Party – later rebranded as Reform UK.
Image: Former leader of Reform UK in Wales, Nathan Gill. Pic: PA
Following an investigation by counter-terrorism police, officers said they believe Gill likely took a minimum of £40,000 in cash.
Prime Minister Sir Keir Starmer demanded an investigation into links between Reform UK and Russia following the case.
Mr Farage’s position on Russia has come under scrutiny in the past. He faced a backlash during the general election campaign when he spoke about the incursion of NATO and how “we provoked this war”in Ukraine.
Speaking to Trevor Phillips, Mr Yusuf insisted his boss has never supported or been sympathetic to Russia’s decision to invade Ukraine, saying it is “not Nigel’s position that ‘we provoked the war’.”
He said: “When he [Farage] was pressed as to how he would respond if he was prime minister and Russian jets encroached into NATO airspace, his view was that those planes should be shot down. We are crystal clear about our position.
“I would also say this: the notion that Vladimir Putin, the murderous dictator, is making decisions based on what Nigel Farage is saying here in England, I think is for the birds.
“We are now in a situation where Ukraine’s sovereignty has been violated, and Vladimir Putin needs to be brought to heel.”
But Labour accused Reform of “pandering to Moscow” following the interview.
Anna Turley, chair of the Labour Party, said Mr Farage has previously called Mr Putin “the leader he most admired and has repeatedly parroted Kremlin talking points”.
She added: “Reform must urgently allow an independent investigation to root out pro-Russia links, to assure the public that Putin holds no sway over their party or its representatives.”
Police have confirmed Mr Farage has not been part of the investigation into Gill.
Mr Farage said on Friday: “An investigation into Russian and Chinese influence over British politics would be welcome.”
The Reform UK MP for Clacton had previously described his former colleague as a “bad apple” and said he was “shocked” after Gill pleaded guilty to bribery.
He said: “Any political party can find in their midst all sorts of terrible people.
“You can never, ever guarantee 100% that everyone you meet in your life, you shake hands with in the pub, is a good person.”