When Donald Trump returned to the White House in 2025, many in the tech world hoped his promises to champion artificial intelligence and cut regulation would outweigh the risks of his famously volatile trade policies. But less than 100 days into his new term, it’s clear that Trump’s aggressive tariffs—and the global response to them—could pose a major threat to the AI boom that helped drive the last two years of tech innovation.
AI companies are already feeling pressure on multiple fronts. They may face difficulties accessing chips and higher data center costs, and they could be hit even harder if enterprises—the main revenue source for many budding AI firms—become less willing to experiment with new AI solutions during a time of economic uncertainty.
World markets tumbled on April 2 when the White House announced a 10% tariff on imports from 90 countries, plus additional “reciprocal tariffs” on 57 of them. A week later, the president paused the 10% tariffs for 90 days but kept a 145% tariff on Chinese goods in place. Trump has said the China tariff would likely decrease after trade talks, but has presented little evidence that negotiations are happening at all.
The tech industry, particularly hardware companies, will be significantly affected, as they’ll bear the cost of tariffs on imported components from across Asia, including China. While the Trump administration reportedly exempted AI chips from tariffs, GPUs and other processors could still become more scarce and expensive. Nvidia GPUs, which power the largest AI models, are fabricated in Taiwan but incorporate components from tariffed countries such as South Korea. Additionally, many critical raw materials—rare earth metals, silicon wafers, and packaging materials originating from Taiwan and China—could be subject to tariffs as high as 30% when entering the U.S.
“While tariffs aren’t causing VCs to pull back from AI investments overall, they are absolutely reshaping how investors evaluate risk,” says Samir Kumar, cofounder of the venture capital firm Touring Capital. “Investors are asking much tougher questions about supply chains—not just where companies are sourcing today, but their ability to second- and third-source critical components, and where their manufacturing is based.”
That’s the supply side. But how will an unstable trade environment affect demand? Numerous sources say C-suite leaders were eager to start AI experiments during the early AI boom of 2023 and 2024. But after relatively few of those “experiments” made it into production and proved their value to the business, executives have grown far more cautious about signing new contracts with AI companies in 2025—especially with startups, says William Falcon, CEO of Lightning AI, whose cloud-based environment enables quick training and launch of AI applications. And that was before tariffs entered the picture.
“So if you’re still in an experimental phase and you’ve got tariffs now, that decision kind of narrows and you’ve got to allocate those funds to something else,” Falcon tells Fast Company. “If you’ve gotten business value from AI . . . you’re more willing to invest into it, you’re more willing to carve out a bit more [budget].”
On the other hand, it’s easy to forget amid the turmoil that the economy remains strong (for now), and enthusiasm around AI is still high. Kumar points out that AI has the potential to act as “a major efficiency and productivity multiplier,” which could sustain—or even boost—enterprise adoption.
Thanks to these factors, many in the venture capital community had expected tech company exits to rebound in 2025, driven by AI startups getting acquired or going public. But the trade war has put those hopes on hold. No one really knows how disruptive the tariffs will be. Investors hope it’ll be a “blip” that vanishes as quickly as it arrived, allowing the AI boom to continue as scheduled. But even if the tariffs were lifted tomorrow, their effects could linger; as with the COVID-era disruptions, supply chains would likely need time to recover.
On the demand side, corporations—the buyers of AI software and services—may become more conservative with their tech spending. Corporate IT budgets will increasingly reflect broader economic sentiment. Right now, things are looking gloomier: Reuters surveyed 167 economists, and 60% said the likelihood of a global recession this year was “high” or “very high.”
Before his election, Trump positioned himself as a champion of the AI industry, promising to shield it from unnecessary regulation. But his reckless trade policies are poised to harm the AI space more than any regulation could.
Ironically, Trump’s tariffs might actually create more demand for AI and robotics in the long term. Trump believes his tariffs will make it so expensive to manufacture or assemble products overseas that companies will bring factories back to the U.S. But those reshored factories may not offer the kinds of jobs Trump promised his base. “We should also expect tariffs to accelerate AI and robotics adoption, as companies look for ways to manage costs when reshoring or expanding into higher labor cost markets,” Kumar says.
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