NVIDIA AI Servers Avoid US Tariffs on Taiwan, But Threats of Section 232 Chip Tariffs Remain

Currently, the tariffs imposed on Taiwan have not yet affected NVIDIA’s artificial intelligence supply chain. However, there remains significant potential for drastic impacts if the United States opts to implement taxes specifically targeting chips.

Tariffs on Taiwan’s Chips: Current Exemptions and Future Risks

The impending negotiations between the United States and Taiwan could present a pivotal challenge for the AI sector, particularly because Taiwan plays a crucial role in the global AI supply chain. Major Taiwanese manufacturers like Foxconn, Wistron, and Quanta are pivotal in producing NVIDIA’s AI hardware. Thus, any tariffs imposed on them would have substantial implications for pricing in the AI market. As of now, reports from Taiwanese media suggest that the newly instituted 20% tariffs do not currently impact semiconductors or AI products.

The core focus of the current tariffs is on only 25% of all exports to the United States, conveniently exempting critical products like semiconductors, consumer electronics, and AI servers. For companies such as NVIDIA and AMD, this ongoing exemption is indeed positive news, at least for the moment. However, the looming threat of tariffs remains under Section 232 of U. S.trade law, which the U. S.is reviewing. This section grants the U. S.government the authority to restrict imports that could be seen as a threat to national security. Notably, both chips and AI equipment have recently been categorized as potential security threats to the nation.

TSMC to increase 2nm wafer production to 60, 000 units by 2026 — Image Credits: TSMC

While it is difficult to predict the likelihood of chip-specific tariffs on Taiwan, historical sentiments expressed by former President Trump regarding Taiwan indicate a strong U. S.interest in maintaining serious trade negotiations. A potential positive factor could be increased investments from Taiwan in the semiconductor industry, in addition to TSMC’s recently announced $165 billion expansion plan. There are also rumors of Intel potentially participating in these trade discussions, signaling that the U. S.seeks comprehensive access to Taiwan’s technological advancements in chips.

As these developments unfold, it will be crucial to monitor the evolving trade dynamics between the United States and Taiwan. The implementation of tariffs under Section 232 could eventually see rates rise between 20% and 50%, which would significantly squeeze NVIDIA’s profit margins.

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