NVIDIA AI Servers Exempt from US Tariffs on Taiwan, Yet Face Potential ‘Chip Tariffs’ Under Section 232 Threat

Although the recent tariffs imposed on Taiwan have not yet disrupted NVIDIA’s AI supply chain, their potential impact could be profound if the United States chooses to implement higher, chip-specific taxes in the future.

The Current Tariff Landscape: Taiwan Exemptions and Future Risks

The negotiations between the US and Taiwan represent a critical juncture for the AI sector, particularly as Taiwan plays a pivotal role in the global AI supply chain. Major Taiwanese manufacturers—like Foxconn, Wistron, and Quanta—are integral to NVIDIA’s AI hardware production. Thus, any tariffs imposed upon them could lead to significant price shifts in AI markets. Fortunately, current reports from Taiwanese media indicate that the recently enacted 20% tariffs do not affect semiconductors or AI technologies at this time.

Presently, the tariffs aimed at Taiwan target approximately 25% of its exports to the US, while semiconductors, consumer electronics, and AI servers remain exempt. This is promising news for companies such as NVIDIA and AMD, at least for the time being. However, there is still the looming threat of tariffs under Section 232, as the US government assesses the national security implications of semiconductor imports. Recently, chips and AI equipment have been classified as potential security risks to the US economy.

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

While it’s difficult to predict the likelihood of increased tariffs on Taiwan, historical remarks from former President Trump indicate a US commitment to robust negotiations regarding the chip industry. An essential factor in securing a favorable agreement could involve boosting Taiwanese investments in chip manufacturing. This aspect is underscored by TSMC’s recent announcement of a $165 billion investment. Additionally, there is speculation that Intel may play a role in these trade discussions, suggesting that the US is keen to gain comprehensive access to Taiwan’s semiconductor technologies.

The progression of US-Taiwan relations in terms of trade will be interesting to observe, particularly as the possibility of Section 232 tariffs lingers. If these tariffs materialize, they could range from 20% to a staggering 50%, which would significantly impact the profit margins of companies like NVIDIA.

Source & Images