Silicon Valley let out a sigh of relief on Wednesday when it learned that President Donald Trump’s tariff bonanza included an exemption for semiconductors, which, at least for now, won’t be subject to higher import duties. But just three days later, some US tech companies may be finding that the loophole actually creates more problems than it solves. After the tariffs were announced, the White House published a list of the products that it says are unaffected, and it doesn’t include many kinds of chip-related goods.

That means only a small number of American manufacturers will be able to continue sourcing chips without needing to factor in higher import costs. The vast majority of semiconductors that come into the US currently are already packaged into products that are not exempt, such as the graphics processing units (GPUs) and servers for training artificial intelligence models. And manufacturing equipment that domestic companies use to produce chips in the US wasn’t spared, either.

“If you are a major chip producer who is making a sizable investment in the US, a hundred billion dollars will buy you a lot less in the next few years than the last few years,” says Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics.

The US Department of Commerce did not respond to a request for comment.

Stacy Rasgon, a senior analyst covering semiconductors at Bernstein Research, says the narrow exception for chips will do little to blunt wider negative impacts on the industry. Given that most semiconductors arrive at US borders packaged into servers, smartphones, and other products, the tariffs amount to “something in the ballpark of a 40 percent blended tariff on that stuff,” Rasgon says, referring to the overall import duty rate applied.

Rasgon notes that the semiconductor industry is deeply dependent on other imports and on the overall health of the US economy, because the components it makes are in so many kinds of consumer products, from cars to refrigerators. “They are macro-exposed,” he says.

To determine what goods the tariffs apply to, the Trump administration relied on a complex existing system called the Harmonized Tariff Schedule (HTS), which organizes millions of different products sold in the US market into numerical categories that correspond to different import duty rates. The White House document lists only a narrow group of HTS codes in the semiconductor field that it says are exempted from the new tariffs.

GPUs, for example, are typically coded as either 8473.30 or 8542.31 in the HTS system, says Nancy Wei, a supply chain analyst at the consulting firm Eurasia Group. But Trump’s waiver only applies to more advanced GPUs in the latter 8542.31 category. It also doesn’t cover other codes for related types of computing hardware. Nvidia’s DGX systems, a pre-configured server with built-in GPUs designed for AI computing tasks, is coded as 8471.50, according to the company’s website, which means it’s likely not exempt from the tariffs.

The line between these distinctions can sometimes be blurry. In 2020, for example, an importer of two Nvidia GPU models asked US authorities to clarify what category it considered them falling under. After looking into the matter, US Customs and Border Protection determined that the two GPUs belong to the 8473.30 category, which also isn’t exempt from the tariffs.

Nvidia’s own disclosures about the customs classifications of its products paint a similar picture. Of the over 1,300 items the company lists on its website, less than one-fifth appear to be exempt from Trump’s new tariffs, according to their correspondent HTS codes. Nvidia declined to comment to WIRED on which of its products it believes the new import duties apply to or not.

Bad News for US AI Firms

If a wide range of GPUs and other electronic components are subject to the highest country-specific tariffs, which are scheduled to kick in next week, US chipmakers and AI firms could be facing a significant increase in costs. That could potentially hamper efforts to build more data centers and train the world’s most cutting-edge artificial intelligence models in the US.

That’s why Nvidia’s stock price is currently “getting killed,” Rasgon says, having shed roughly one-third of its value since the start of 2025.

“AI hardware, particularly high-end GPUs from Nvidia, will see rising costs, potentially stalling AI infrastructure development in the US,” says Wei from Eurasia Group. “Cloud computing, quantum computing, and military-grade semiconductor applications could also be impacted due to higher costs and supply uncertainties.”

Mark Wu, a professor at Harvard Law School who specializes in international trade, says the looming possibility that other countries embedded in the semiconductor supply chain could impose retaliatory tariffs on the US is creating a very unpredictable environment for businesses. Trump may also soon announce more tariffs specifically targeting chips, something he alluded to at a press briefing on Thursday. “There’s so many different scenarios,” Wu says. “It’s almost futile to sort of speculate without knowing what’s under consideration.”

More Challenges to Reshoring

Trump has said that his trade policies are intended to bring more manufacturing to the US, but they threaten to reverse what had been a bumper period for US chipmaking. The Semiconductor Industry Association recently released figures showing that sales grew 48.4 percent in the Americas between February 2023 and 2024, far above rates in China, where sales only increased 5.6 percent, and Europe, which saw sales decrease 8.1 percent.

The US has a relatively small share of the global chipmaking market as a whole, however, due to decades of offshoring. Fabrication plants located in the country account for just 12 percent of worldwide capacity, down from 37 percent in 1990. The CHIPS Act, introduced under the Biden administration, sought to reverse the trend by appropriating $52 billion for investment in chip manufacturing, training, and research. Trump called the law a “horrible thing” and recently set up a new office to manage its investments.

A glaring omission in the list of HTS code exempt from Trump’s tariffs are those that correspond to lithography machines, a highly sophisticated category of equipment central to chipmaking. Most of the world’s advanced lithography machines are made today in countries like the Netherlands (subject to a 20 percent tariff) and Japan (a 24 percent tariff). If these devices become significantly more costly to import, it could get in the way of bringing semiconductor manufacturing back to the US.

Also hit by Trump’s tariffs are a litany of less fancy but still essential ingredients for chipmaking: steel, aluminum, electrical components, lighting, and water treatment technology. All of those goods could become more expensive thanks to tariffs. “This is the classic tariff conundrum: If you put tariffs on something, it protects one kind of business, but everything upstream and downstream can lose out,” says Chorzempa.

US Allies Feel the Heat

While some countries that are already subject to US sanctions, like Russia and North Korea, were not included in the tariffs, many American allies are, like Taiwan, which plays an outsize role in the global semiconductor supply chain today compared to its size, because it’s home to companies like Taiwan Semiconductor Manufacturing Company (TSMC), which produces the lion’s share of the world’s most advanced chips.

Taiwan will still feel the impact of the tariffs, despite the semiconductor carve-out, because most of what it actually exports to the US is not exempt, says Jason Hsu, a former Taiwan legislator and senior fellow at the Hudson Institute, a DC-based think tank.

Only about 10 percent of Taiwan’s exports to the US last year were semiconductor products that would be exempt from the new tariffs, according to trade data released by the Department of Commerce. The vast majority of Taiwan’s exports are things like data servers and will be taxed an additional 32 percent.

Unlike TSMC, Taiwanese companies that make servers often operate on thin margins, so they may have no choice but to raise prices for their American clients. “We might be looking at AI server prices going completely out of the roof after that,” Hsu says.

Hsu notes that the new tariffs will particularly hurt Southeast Asian countries, which could undermine a long-standing US strategic objective to decouple from supply chains in China. Countries in the region are being hit with some of the highest tariff rates of all—like Vietnam at 46 percent and Thailand at 36 percent—figures that could deter chipmaking companies like Intel and Micron from moving their factories out of China and into these places.

“I see no soft landing to this,” Hsu says. “I see this as becoming an explosion of global supply chain disorder and chaos. The ramifications are going to be very long and painful.”