Trump Has A Bold Vision for Artificial Intelligence. Tariffs Could Wreck It.

President Donald Trump’s second term has seen several staggering deal announcements to advance domestic investment in artificial intelligence. But his push for an industrial revolution in AI is in significant tension with his plans for wide-ranging tariffs on semiconductors. In particular, a handful of companies can make or break his ambitions, and if he wants them to deliver, he’ll need to get creative with his tariff plans.

At Trump’s order, the US Commerce Department is moving to complete a Section 232 investigation on the national security impact of semiconductor imports. Tariffs stemming from this order would target not only chips directly imported to the US but also products containing chips, including smartphones, servers, and laptops. The tariffs would also target “foreign monopoly exposure” in manufacturing tools used in chip fabrication, which would include tools essential to cutting-edge semiconductor manufacturing like Netherlands-based ASML’s advanced lithography machines and Tokyo Electron’s coater/developer tools.

Trump’s strategy assumes that high tariffs will drive companies to build facilities in the US. He is also using the threat of high “reciprocal” tariffs to extract investment deals from abroad. This approach faces practical challenges, however. Foreign governments have limited power to force companies to the negotiating table, and companies will only commit to investments if the economics make sense. High tariffs on the critical inputs to build advanced fabs and AI data centers in the U.S. would destroy the credibility of any investment pledge made on a geopolitical pretense.