Trump Introduces 25 Percent AI Chip Tariff In The Name Of National Security

Sorry, Nvidia.

Donald Trump has announced a 25 percent tariff on certain AI chips imported to the U.S., a move aimed at bringing manufacturing back to the country.

But the decision will anger China, which will have to pay the tariff even on chips manufactured in nearby Taiwan. Let’s examine why.

First, it’s important to understand exactly what is affected, and when.

The tariffs apply to “certain advanced computing chips, such as the NVIDIA H200 and AMD MI325X,” which are near top-of-the-line devices specifically intended for AI applications.

Trump approved the sale of H200 chips to China last December, with the U.S. taking its pound of flesh in the form of 25 percent of sales revenue.

Importantly, not all such chips coming into the U.S. will be affected by the new duty:

“This tariff will not apply to chips that are imported to support the buildout of the U.S. technology supply chain and the strengthening of domestic manufacturing capacity for derivatives of semiconductors,” the White House said in a press release.

That means chips and derivative devices imported for datacenters will not be affected. Likewise, chips and derivative devices for startups; non-datacenter consumer applications; non-datacenter civil industrial applications; and U.S. public sector applications will also be exempt.

The main impact will be felt by businesses importing chips and devices for their own products, as well as imported chips that are simply routing through the U.S.

This is the kicker for China.

U.S. companies like Nvidia and AMD might design the chips, but they are largely made in Taiwan. Per a U.S. announcement this week, Taiwan-made chips will need to be imported to the U.S. for assessment by “a third-party testing lab” to confirm their technical capabilities before they can be shipped to China.

Those chips will be subject to the new tariff when they enter the U.S. and while the new duty won’t be stacked with the other tariffs Trump imposed last year, it will certainly increase the cost to any Chinese buyer who decides they want to risk the wrath of the CCP.

This article originally appeared on MES Computing’s sister site Computing.