Trump’s Return Could Trigger a Trade War Over British AI Hardware

Few in Westminster anticipated that Donald Trump’s early campaign remarks implying that Britain’s “AI advantage might be coming at America’s expense” would be more than rhetorical. However, as January 2026 progresses, top officials in the Department for Business and Trade are discreetly getting ready for something far more acute: a targeted trade war that might put Britain’s exports of AI hardware in jeopardy.

The risk is related to leverage rather than unfair competition or protectionism in the UK. Trump has long presented trade as a means of coercion, employing tariffs to reward loyalty and penalize deviation in addition to rebalancing deficits. In that context, Britain’s expanding technological ties with China—particularly with regard to server infrastructure and data center equipment—may turn into a political liability.

The Trump administration unexpectedly levied tariffs on South Korean 5G base stations and Indian-made microcontrollers back in 2025. The speed at which those policies were drafted was noted by industry observers; one lobbyist referred to them as “overnight punishments dressed as economic strategy.” The overlap between America’s deepest technological fears and Britain’s most valuable emerging exports poses a threat to the country.

Silicon is at the heart of this. The high-performance computing industry in the UK, which is led by companies like Graphcore, ARM, and a few chip startups in Cambridge and Bristol, has grown to be a major supplier of machine-learning accelerators to customers in the US and Europe. A large portion of that hardware will be used in server farms, AI labs, and research projects related to defense.

Rumored in DC think tank circles, a 20% sectoral tariff on British AI hardware would not only be expensive but also have the potential to reroute entire supply chains. Even if performance is subpar, American buyers may choose to move contracts toward domestic alternatives. It wouldn’t be the first time engineering metrics were surpassed by political optics.

A senior UK official reportedly questioned a group of AI executives at a closed-door roundtable in Davos last week about whether “friend-shoring” was sufficient to safeguard their contracts. “Friendship fades when tariffs start biting,” one participant retorted.

The risk to mid-sized businesses is not limited to lost revenue. It’s the harm done to one’s reputation by coming out as vulnerable. Rather than volatility, venture capital typically follows certainty. Even the impression of conflict with the United States can deter investment in hardware-focused startups that are already dealing with growing expenses and a lack of skilled workers.

Last autumn, I spoke with a chip designer in London who discreetly acknowledged that their American partners were “already writing Trump scenarios into their 2026 plans.”

Nobody wants to say it too loudly, so that’s the quiet part. However, they are posing for it.

Any disruption in transatlantic hardware flows could be detrimental to both parties at a time when AI optimism is driving record valuations and R&D budgets. Component design, not mass production, is Britain’s strength. Even domestic giants like AMD and Intel can’t always plug performance gaps quickly enough, so the U.S. depends on imports to fill them.

Ironically, Trump’s own goals of surpassing China in the AI race may suffer if there is a hardware trade dispute. U.S. cloud companies may experience delays in developing next-generation models, scaling language systems, or upgrading inference clusters—tasks where latency and compute density are crucial—if UK chips become more costly or difficult to obtain.

This impending conflict also has a political asymmetry. Unlike a bloc like the EU, Britain lacks the retaliatory power. Its trade with the United States is more concentrated, more limited, and crucially, it still does not have a full-fledged free trade agreement, which Trump has continuously downplayed.

The UK is therefore a reasonably easy target.

However, the strategic consequences might extend well beyond AI. The same chips that would be ensnared in the dragnet are essential to defense systems, healthcare AI tools, and British telecom networks. Tariffs may prevent reinvestment in these domestic capabilities if they interfere with export revenue streams.

According to reports, Whitehall is investigating proactive outreach in an effort to foster bipartisan cooperation in Congress and establish enduring avenues for AI cooperation. However, political hedging may provide little defense given Trump’s dominance in the Republican field and his threats to reshape the American tech industry.

Britain may still avoid the full impact through strategic alliances. Redundancy may be provided by closer collaboration with South Korea, Japan, and European AI clusters. Policymakers are already hearing rumors of a “Euro-Pacific AI corridor”—more of a supply-chain insurance policy than a defense pact.

The message is complex for early-stage founders. Grow quickly, but diversify more wisely. Even if it means sacrificing short-term revenue, steer clear of reliance on U.S. distribution. In a market where American venture capital continues to dominate, it is an agonizing request.

Nevertheless, the AI hardware ecosystem in the UK has always flourished despite limitations. Despite having fewer factories, fewer subsidies, and smaller teams, it still performs better than expected. This could be the moment to demonstrate resilience as a comparative advantage.

The ability of Washington’s trade hawks to discern between structural sabotage and geopolitical signaling will be crucial in the upcoming months. Domestic manufacturers may applaud in the short term if British AI hardware is targeted. However, over time, it might undermine the very global cooperation that keeps both parties on the cutting edge of innovation.