Trump’s 100% AI Chip Tariff Proposal Has Tech Lobbyists on High Alert

The lobbyists arrive early on some mornings in Washington, a sign that something serious is about to happen.

Small groups of men and women in navy suits lean toward one another at 7:15 a.m., speaking in cautious snatches as the espresso machines along Pennsylvania Avenue begin to hiss. The term “100 percent tariff” keeps coming up, followed by the pause that is typically associated with medical diagnoses.

The global tech industry has been rocked by Donald Trump’s proposal to impose tariffs of up to 100% on imported semiconductors, particularly those that power artificial intelligence. On the surface, the reasoning seems simple: compel companies to manufacture chips in the United States or face harsh penalties.

But there’s nothing simple about chips.

Today’s semiconductor is more of a journey than a product. It bears the fingerprints of half the world and was designed in California, manufactured in Taiwan, packaged in Malaysia, put together in China, and then returned to the United States. Observing policymakers discuss tariffs gives the impression that this complexity is simplified beyond recognition.

Investors appear to view the proposal as more of a negotiating strategy than a final destination, with some elements of leverage.

Trump has hinted at a system intended to coerce businesses into moving production by stating that American-made goods would completely avoid the tariff. In a measured response, industry associations such as the Semiconductor Industry Association have voiced support for domestic manufacturing targets while subtly requesting information regarding exemptions.

The word “exemptions” is used frequently.

Nvidia engineers in Santa Clara are aware that Taiwan Semiconductor Manufacturing Company, or TSMC, is a major manufacturer of their most cutting-edge AI chips. It’s not an ideological arrangement. It’s useful. Despite billions of dollars in subsidies, TSMC spent decades developing fabrication capacity that is still hard to duplicate elsewhere. Tariffs might not be able to shorten that timeline on their own.

Discussions in tech companies often veer quickly from politics to mathematics. A 100% tariff does more than just marginally increase prices. They are doubled. That increase shifts rather than vanishes. into the budgets of servers. into the cost of the cloud. into burn rates at startup. eventually into the cost of commonplace goods. Automobiles and phones. refrigerators.

The extent to which these invisible wafers underpin modern life is still not entirely understood by consumers.

In the meantime, the desert air shimmers over partially constructed buildings that resemble spacecraft hangars rather than factories in Phoenix, Arizona, where TSMC has been constructing new fabs. These initiatives are frequently used to demonstrate that tariffs and subsidies are already having an impact on bringing manufacturing closer to home.

Even so, employees complain about staffing shortages, delays, and the challenge of replicating Taiwan’s ecosystem.

It’s like “trying to rebuild an entire city, not just a building,” one executive said in private.

All of this has a political rhythm as well. According to Reuters, U.S. officials have occasionally slowed the implementation of semiconductor tariffs out of concern that they might jeopardize delicate trade agreements or provoke Chinese retaliation. To put it another way, the threat may be just as potent as the policy. Lobbyists are naturally aware of this.

It was difficult to ignore the sudden influx of semiconductor executives in the city as you passed the Capitol recently. They were rushing from one meeting to another, their voices low but urgent. Unless it senses something genuine, the chip industry rarely acts in this way.

Even though the outcome is uncertain, something is real in this situation.

Tariffs aren’t the only thing that worries people. Fragmentation is the cause.

Global specialization—each nation doing what it does best—has been the foundation of the semiconductor industry for decades. That reasoning could be undermined by tariffs, which would force businesses to duplicate their supply chains across borders, raising costs while decreasing efficiency.

That is regarded as resilience by some policymakers. Some perceive it as friction that is self-inflicted.

Companies like Intel, meanwhile, are in a precarious middle ground where they are both the recipients of domestic investment and at risk of international reprisals. Trump has created an environment that combines opportunity and anxiety by openly pressuring chip executives, challenging leadership, and calling for quicker progress.

Nobody wants to be on the receiving end of the next announcement, it seems.

It becomes evident from watching this develop that tariffs are about more than just economics. They have to do with control over the most important AI-era technology, leverage, and symbolism.

The chips themselves, which are etched with nanometer-scale circuits, are silent. However, they are hearing more and more decisions around them.