-
President Donald Trump is threatening to impose tariffs of up to 100% on chips made in Taiwan.
-
That could be bad news for Nvidia, which relies on Taiwan’s TSMC for its chip supply.
-
Nvidia’s value declined by 17% on Monday in a market rout triggered by China’s DeepSeek.
President Donald Trump’s pledge to impose tariffs on semiconductors made in Taiwan could deal a fresh blow to Nvidia, whose shares dropped by 17% on Monday in a DeepSeek-induced sell-off.
Tech firms like Nvidia have long relied on Taiwan’s TSMC, the world’s largest contract semiconductor manufacturer, to make the specialist AI chips they design in the US.
That relationship was threatened on Monday as the president delivered a speech to Republicans in which he said tariffs on Taiwan would be aimed at returning the production of chips to the US.
“They left us and went to Taiwan,” Trump said, seeming to refer to US firms that source processors from TSMC.
Trump said companies wouldn’t want to pay a “25%, 50%, or even a 100% tax.”
US tariffs on Taiwan’s semiconductors could result in a steep increase in costs to Nvidia and other significant customers, such as Apple and AMD. Chip manufacturing efforts in the US are less developed and more expensive than those in Taiwan.
The threat of tariffs risks a double blow for Nvidia, one of TSMC’s largest customers. On Monday, after the Chinese startup DeepSeek released an AI model, Nvidia lost about $589 billion in market value.
Investors reacted with panic, fearing that Nvidia’s chips may face a decline in demand. DeepSeek’s new model claims to have achieved performance levels similar to a frontier model created by OpenAI but with fewer and less-advanced chips.
An Nvidia spokesperson declined to comment.
Jensen Huang’s Nvidia would face risks from tariffs on imports from Taiwan.Getty Images
It’s unclear whether Trump will proceed with tariffs on Taiwan, but US leaders have increasingly exercised caution about dependence on Taiwan for chips.
China has long overshadowed the independently governed island with the prospect of invasion. A war could hugely disrupt the US economy, endangering the supply of the chips vital to swaths of the US tech sector.
The COVID-19 pandemic also exposed the vulnerability of global supply chains.
President Joe Biden, as part of his CHIPS Act, sought to encourage more semiconductor firms to set up business in the US by offering incentives such as tax breaks. TSMC has moved some of its operations to the US, opening chip manufacturing plants in Arizona as part of a $65 billion initiative.
While Trump has veered toward imposing tariffs to bolster US chip production, the US’s chip manufacturing sector could take years to develop the same capacity as Taiwan’s. That could mean higher prices for hardware that relies on chips from Taiwan, such as Apple’s iPhones, Nvidia’s GPUs, and AMD’s processors.
“If the argument is that this is the way to force it to move here, TSMC is already moving here,” William Reinsch, a senior advisor with the Center for Strategic and International Studies, told Yahoo Finance last year after Trump floated the idea of imposing tariffs.
“They’re already building a fab plant in Arizona,” he added. “That’s all already underway and the tariffs aren’t going to make that move any faster. If anything, they might complicate the effort.”
Taiwan responded to Trump’s tariff proposal by pointing to the relationship between the Taiwanese and US economies.
In a statement reported by Reuters on Tuesday, Taiwan’s economy ministry said: “Taiwan and the U.S. semiconductor and other technology industries are highly complementary to each other, especially the U.S.-designed, Taiwan-foundry model, which creates a win-win business model for Taiwan and U.S. industries.”
AI is among the sectors where the US and China are in an intensifying battle for global technological dominance. On January 21, Trump announced, alongside the leaders of OpenAI, SoftBank, and Oracle, a $500 billion initiative to boost AI infrastructure in the US.
TSMC did not immediately respond to a request for comment from Business Insider.
Read the original article on Business Insider
Read the full article here