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.
Diane Gall’s husband, Martyn, had been out on a morning bike ride with his friends on their usual route one winter morning in November 2020 – when he was killed by a reckless driver.
Diane and her daughters had to wait almost three years for her husband’s case to be heard in court.
The case was postponed three times, often without warning.
“You just honestly lose faith in the system,” she says.
“You feel there’s a system there that should be there to help and protect victims, to be victims’ voices, but the constant delays really take their toll on individuals and us as a family.”
Image: Diane Gall
The first trial date in April 2022 was cancelled on the day and pushed four months later.
The day before the new date, the family were told it wasn’t going ahead due to the barristers’ strike.
It was moved to November 2022, then postponed again, before eventually being heard in June the following year.
“You’re building yourself up for all these dates, preparing yourself for what you’re going to hear, reliving everything that has happened, and it’s retraumatising,” says Diane.
Image: Diane Gall’s husband, Martyn
‘Radical’ reform needed
Diane’s wait for justice gives us an insight into what thousands of victims and their families are battling every day in a court system cracking under the weight of a record-high backlog.
There are 76,957 cases waiting to be heard in Crown Courts across England and Wales, as of the end of March 2025.
To relieve pressure on the system, an independent review by Sir Brian Leveson last month made a number of recommendations – including creating a new division of the Crown Court known as an intermediate court, made up of a judge and two magistrates, and allowing defendants to choose to be tried by judge alone.
He said only “radical” reform would have an impact.
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Will court reforms tackle backlog?
But according to exclusive data collected for Sky News by the Law Society, there is strong scepticism among the industry about some proposed plans.
Before the review was published, we asked 545 criminal lawyers about the idea of a new tier to the Crown Court – 60% of them told us a type of Intermediate Court was unlikely to reduce the backlog.
“It’s moving a problem from one place to another, like moving the deck chairs on the Titanic. It’s not going to do anything,” says Stuart Nolan, chair of the Law Society’s criminal law committee.
“I think the problem with it is lack of resources or lack of will to give the proper resources.
“You can say we need more staff, but they’re not just any staff, they are people with experience and training, and that doesn’t come quickly or cheap.”
Instead, the lawyers told us creating an additional court would harm the quality of justice.
Chloe Jay, senior partner at Shentons Solicitors, agrees the quality of justice will be impacted by a new court division that could sit without a jury for some offences.
She says: “The beauty of the Crown Court is that you have two separate bodies, one deciding the facts and one deciding law.
Image: Casey Jenkins, president of London Criminal Court Solicitors’ Association
“So the jury doesn’t hear the legal arguments about what evidence should be excluded, whether something should be considered as part of the trial, and that’s what really gives you that really good, sound quality of justice, because you haven’t got one person making all the decisions together.
“Potentially in an intermediate court, that is what will happen. The same three people will hear those legal arguments and make the finding of guilt or innocence.”
The most striking finding from the survey is that 73% of criminal lawyers surveyed are worried about offences no longer sitting in front of a jury.
Casey Jenkins, president of London Criminal Court Solicitors’ Association, says this could create unconscious bias.
“There’s a real risk that people from minority backgrounds are negatively impacted by having a trial by a judge and not a jury of their peers who may have the same or similar social background to them,” she says.
“A jury trial is protection against professional judicial decisions by the state. It’s a fundamental right that can be invoked.”
Instead of moving some offences to a new Crown Court tier, our survey suggests criminal lawyers would be more in favour of moving cases to the magistrates instead.
Under the Leveson proposals, trials for offences such as dangerous driving, possessing an offensive weapon and theft could be moved out of the Crown Courts.
‘Catastrophic consequences’
Richard Atkinson, president of the Law Society, says fixing the system will only work with fair funding.
“It’s as important as the NHS, it’s as important as the education system,” he says. “If it crumbles, there will be catastrophic consequences.”
Ms Jenkins agrees that for too long the system has been allowed to fail.
“Everyone deserves justice, this is just not the answer,” she says.
“It’s just the wrong solution to a problem that was caused by chronic, long-term under-investment in the criminal justice system, which is a vital public service.
“The only way to ensure that there’s timely and fair justice for everybody is to invest in all parts of the system from the bottom up: local services, probation, restorative justice, more funding for lawyers so we can give early advice, more funding for the police so that cases are better prepared.”
Government vows ‘bold and ambitious reform’
In response to Sky News’ findings, the minister for courts and legal services, Sarah Sackman KC MP, told Sky News: “We inherited a record and rising court backlog, leaving many victims facing unacceptable delays to see justice done.
“We’ve already boosted funding in our courts system, but the only way out of this crisis is bold and ambitious reform. That is why we are carefully considering Sir Brian’s bold recommendations for long-term change.
“I won’t hesitate to do whatever needs to be done for the benefit of victims.”
The driver that killed Diane’s husband was eventually convicted. She wants those making decisions about the court system to remember those impacted the most in every case.
Every victim and every family.
“You do just feel like a cog in a big wheel that’s out of your control,” she says. “Because you know justice delayed is justice denied.”