The administration of former US President Donald Trump has announced a significant new trade measure, imposing a 25% tariff on specific high-performance artificial intelligence (AI) chips, including models from industry leaders Nvidia and AMD. The move, framed as a national security imperative, aims to reduce American reliance on foreign semiconductor supply chains.
Details of the Tariff Proclamation
The White House released the proclamation on Wednesday, following a nine-month investigation under Section 232 of the Trade Expansion Act of 1962. The order targets advanced semiconductors meeting certain performance benchmarks, explicitly naming Nvidia's H200 AI processor and AMD's MI325X chip. The administration stated that the United States currently manufactures only about 10% of the chips it requires, labelling this foreign dependency a significant economic and national security vulnerability.
However, the tariffs are designed to be narrowly focused. A key exemption means the duties will not apply to chips imported for use in US data centres, which are massive consumers of AI hardware. Further exemptions cover startups, non-datacentre consumer applications, civil industrial uses, and the public sector. US Commerce Secretary Howard Lutnick has been granted broad discretionary power to apply additional exemptions.
Broader Context and Market Impact
This action is part of a wider strategy by the Trump administration to use tariffs as a tool to incentivise domestic manufacturing. In a separate but related move from December, Trump said he would impose tariffs on Chinese semiconductor imports, though that action was delayed until June 2027. The latest announcement suggests a relatively light touch for now, with significant carve-outs preventing wider disruption.
The news prompted a slight dip in the after-hours trading of shares for affected companies, including Nvidia, AMD, and Qualcomm. While US firms design many leading chips, most are fabricated overseas, predominantly by Taiwan Semiconductor Manufacturing Co (TSMC).
Complex Rules for China Exports
The tariff policy intersects with ongoing export controls. The administration recently mandated that AI chips destined for China must be routed through the United States for third-party testing when shipped from their manufacturing base in Taiwan. This detour means the chips become subject to the new 25% tariff upon US entry. Last year, Trump had suggested allowing Nvidia to sell H200 chips to China in exchange for a cut of sales, a proposal that raised constitutional questions among legal experts.
In statements, AMD said it complies with all US export laws, while Nvidia did not immediately comment. The Semiconductor Industry Association could not be reached for comment.
Looking ahead, a White House fact sheet indicated that the administration may consider broader tariffs on semiconductor imports in the future to further encourage domestic production. An annex to the latest order clarified that the 25% chip tariff would not be added on top of other existing Section 232 duties on materials like steel and aluminium.
