President Trump’s tariff policy has sparked a trade war and fueled chaos across sectors — especially those most reliant on foreign manufacturing, like tech.
Semiconductors and tech hardware companies are likely to be among the hardest impacted in this space, as stock price volatility reflects uncertainty around the supply and demand dynamics in the United States and abroad. That is one reason why the recent stock selloff has been more pronounced in these areas than in most other sectors. Upcoming earnings guidance may offer clarity around forward expectations and how corporations are positioning for tariff impacts.
Semiconductors and Hardware Feeling the Effects
Tariffs will directly increase manufacturing costs and disrupt supply chains. They are also poised to upend the delicate U.S.-China trade relationship. More so than other pockets of tech, semiconductor and hardware firms rely heavily on global supply chains — and manufacturing in countries like China and Mexico where input costs are lower. These factors make semis and hardware more prone to tariff effects.
While semis themselves are largely exempt from tariffs for now, the end products (such as autos and consumer electronics) containing these chips are being hit by tariffs, effectively impacting the entire industry. The tariffs in play are particularly damaging to countries in Asia — including major players in the global semi and hardware supply chains like Taiwan, South Korea, and Japan.
An Uncertain Near-Term Outlook
Compound issues around trade are complicating tech’s near-term outlook. The source of much of this uncertainty: There is broad skepticism that Trump’s stated goal of bringing tech manufacturing back to the United States through tariffs is a viable long-term strategy.
Advanced technology is at the heart of the U.S. strategic competition with China. That is one reason why recent U.S. administrations have focused on incentivizing companies to invest in U.S. tech infrastructure. In the wake of the 2022 CHIPS Act, semiconductor companies like TSMC and Intel ramped up their investment in U.S. infrastructure, breaking ground on fabs in states like Arizona where CHIPS incentives are strongest at the state level.
Trump’s tariffs represent a push to jump-start this reshoring effort, even as experts are mostly skeptical about the effectiveness of tariffs in bringing manufacturing back to the United States. Companies are considered unlikely to rapidly expand capacity. Why? Doing so would require long-term capital commitments across political administrations, as building a wafer fabrication plant in the United States would take years. Additionally, higher U.S. labor costs relative to manufacturing hubs such as China, India, Vietnam and Singapore are another hurdle for companies looking to onshore.
It is not just semis and hardware companies that are affected. One expert points out more than half of Amazon’s top sellers are Chinese, underscoring the potential risk to its retail business.
Experts see a risk of a vicious circle of tariffs and retaliatory responses driving down overall tech demand and broad economic growth. IDC estimates the new wave of tariffs could slash global IP spending in half over the next six months. Tariffs are expected to drive down U.S. real GDP growth by 0.9% in 2025, and by 0.4%-0.6% going forward.
In 2024, a massive 29% of U.S. semi manufacturing machinery exports flowed to China. Some key semi players are already reporting significant drops in export volumes to China. There is concern among industry watchers that tariffs will hurt the competitiveness of U.S. tech compared with China.
Additionally, tariffs will exert pricing pressures that tech companies will likely pass on to consumers. Amazon’s Andy Jassy commented on sellers passing on the costs to consumers. Even if successful, the reshoring push will ultimately result in higher prices at the point of purchase. A pricing expert formerly with a large semi company estimates reshoring tech manufacturing to North America would raise the price consumers pay by at least 25%-50%.
Lack of Policy Clarity Slowing Decision-Making
Globalization has been the driving force for the growth of the U.S. IT services sector in recent decades. Now, escalating trade tensions are challenging IT company growth rates and the sector’s status as a driver of broad GDP growth.
Analysts cite Trump’s goalpost-moving playbook as another source of unease among tech companies. Many say their inability to plan long-term due to ever-shifting tariff plans is causing significant uncertainty for their businesses.
This uncertainty is causing delays in decision-making, which could stretch lead times in areas like IT. The unpredictable environment is causing IT companies to exert caution with their procurement and expansion plans, potentially affecting their long-term growth strategies.
How Companies Are Trying to Mitigate Tariff Impacts
While the ultimate scope and impact of tariffs is still unclear, tech companies are preparing for a wide range of scenarios and developing strategies to mitigate potential operational and supply chain headwinds.
Some companies, like Taiwan Semiconductor (TSMC) and Apple, have responded by announcing billions of dollars of new U.S. manufacturing investments in an attempt to offset some of the negative tariff impact. The hope is that stepping up U.S. investment could ease tensions with the administration and potentially help secure a tariff exemption. Yet some analysts believe such a strategy may not be enough to shield tech companies from tariff headwinds.
Other firms such as Nvidia and Broadcom say they are staying in wait-and-see mode until the uncertainty clears. Still others are shifting their production away from countries like China that are more exposed to tariffs. One expert points out that companies have been preparing for the worst by scouting out alternative factory locations since Trump’s election odds started rising, yet heightened global uncertainty is expected to persist near term.
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Director of Research, Tech, Media and Telecom
Michelle Brophy serves as the Director of Research, Tech, Media and Telecom at AlphaSense. Prior to joining AlphaSense, Michelle spent 3 years as the Strategist for TMT at Guidepoint Insights. Prior to this, Michelle spent 18 years on the buy side, in both portfolio manager and senior equity analyst roles, at Hilltop Park Capital and Kingdon Capital Management. Michelle resides in New York City.
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