The Trump administration is considering a major expansion of semiconductor tariffs that could extend beyond chips to downstream products including game consoles and servers, according to a Politico report published Thursday that cited eight people familiar with the discussions.
One official who previously served in the Trump administration and now works at a major U.S. technology trade association called the idea "the dumbest way to pursue U.S. AI dominance," adding that it would be like "cutting off both legs at the starting line."
CCIA says the plan could cut $90 billion from U.S. GDP each year
The Computer & Communications Industry Association, or CCIA, estimated in June that the tariff package could cost the U.S. about $90 billion in GDP annually. It also said roughly 20% of data center projects planned for 2026 through 2030 could be delayed, canceled, or moved overseas.
At the center of the dispute is a Commerce Department report that had been scheduled for July 1 and was meant to determine whether tariff exemptions for data centers would remain in place. The report has not been made public, but the article said many in the industry see it as the focus of closed-door talks between administration officials and tech lobbying groups.
Section 232 may be used to widen the tariff net
The tariffs under discussion would rely on Section 232, which allows the president to impose duties on imports deemed to raise national security concerns. Semiconductors are one of the targets in that process.
Earlier this year, Trump had already imposed a 25% tariff on semiconductors, while carving out exemptions for data centers, research, startups, and consumer devices. According to the report, Commerce officials have privately indicated that those exemptions may not continue.
For consumers, that could show up quickly in the prices of smartphones, laptops, tablets, and smartwatches. In a letter to Treasury Secretary Bessent, CCIA said consumer devices are the main interface through which Americans access AI tools. If higher prices keep people from buying those products, the pace of AI adoption would slow rather than accelerate.
Domestic capacity takes years, but tariffs would raise costs now
A core problem is timing. Building chip manufacturing capacity in the U.S. takes years from construction to volume production, and tariffs cannot compress that schedule.
An analysis from The Next Web framed the contradiction this way: taxing imported chips now would raise the cost of the very thing Trump says he wants more of, large-scale U.S. AI infrastructure.
Commerce Secretary Lutnick is backing a duty-free quota system. Under the framework described in the report, the government would set a total volume of chip imports that could enter without tariffs. Companies seeking those exemptions would have to commit to producing a certain amount of chips in the United States, and tariff rates could vary by country. His priority is reshoring, bringing chip production now located abroad back to the U.S., and he believes broader tariff coverage would create the needed pressure.
Industry fears quota shortages and double taxation
Critics say that design could widen the gap between the number of duty-free chips available and the amount U.S. companies actually need. One technology industry representative said the exemption volumes discussed by Lutnick would not even be enough for hyperscale cloud providers such as Google, Microsoft, and Amazon, much less the rest of the market.
Advanced chip shortages are expected to last through 2027. Gartner said yesterday that, with supply constraints pushing prices higher, global semiconductor revenue is now projected to reach $1.6 trillion in 2026 earlier than previously expected.
With shortages already in place, economists expect additional tariffs to push chip prices higher still. The report said companies likely to feel the pressure first include fabless chip designers that rely on overseas manufacturing, such as NVIDIA and AMD. Apple could also face rivals in overseas markets that do not have to absorb the same tariff burden.
Politico also reported that some chip suppliers may expand operations in China to avoid the tariffs, a shift that could leave Chinese manufacturers in a stronger position.
Tech groups ask for one thing: no tariff stacking
Meetings between technology lobbying groups and Trump officials have become more frequent since the summer, but people familiar with the talks told Politico that the direction has recently "turned negative."
The industry's main request is narrow: if tariffs cannot be avoided, chips should not be taxed once as components and again after they are embedded in downstream products. The industry calls that stacking.
In practice, that means the same chip could face one tariff when it enters the country on its own and another when it later arrives inside a server or similar product.
CCIA has also suggested adopting a de minimis-style threshold, under which goods below a certain weight or value would be exempt from tariffs. The group said that could preserve a path for used and refurbished devices, since sellers often cannot provide full documentation tracing the origin of the chips inside them.