[News] U.S. Reportedly Risks $1.4T GDP Loss in 10 Years from 25% Chip Tariffs, with AI and Auto Hit Hard

Trump’s tariffs have kept the industry on alert. According to ijiwei, citing a report from the U.S. think tank Information Technology and Innovation Foundation (ITIF), implementing a blanket 25 percent tariff on semiconductor imports would lead to a 0.18 percent decline in U.S. economic growth in the first year. If maintained over a decade, the slowdown would deepen, reaching 0.76 percent by the tenth year.

ITIF has modeled the economic impact of 25% tariff on U.S. semiconductor imports. According to its analysis, such a policy would have widespread economic repercussions, reducing U.S. GDP by a total of USD 1.4 trillion over a decade.

Under a 25 percent tariff scenario, ITIF projects that the average American would see a USD 122 decline in living standard growth in the first year. By year ten, that loss would accumulate to USD 4,208 in forgone gains

25% Semiconductor Tariff Scenario Could Hit AI and Auto Industries

The report indicates that major sectors such as AI and automotive would be significantly affected, as nearly all advanced products depend on semiconductors for manufacturing, and imposing tariffs on chips would further drive up costs for both businesses and consumers.

Using the automotive industry as an example, ITIF indicates that a 25% increase in semiconductor costs could push vehicle prices up by as much as USD 1,000.

In addition, ITIF notes that if the 25% semiconductor tariff takes effect, the value of semiconductors installed in each vehicle is expected to reach USD 4,000 by 2030—an 800% increase compared to 2020. ITIF states that the impact would be even more pronounced in the electric vehicle (EV) sector, as EVs use up to 20 times more semiconductors than conventional cars.

Meanwhile, the report indicates that as for the AI sector, a hyperscale data center with 5,000 servers uses at least 340,000 chips, from CPU, GPU, DRAM, NAND, NIC to PMIC— and even more in larger setups. Tariffs could slow future data center builds or sharply raise construction and operating costs, as companies scramble to replace imported chips with domestic alternatives, as per ITIF.

As for the feasibility of shifting production to the U.S., ITIF points out that only 12% of the world’s semiconductors are currently manufactured in the U.S. This indicates that if the auto industry—and other impacted sectors—attempt to rely on U.S. suppliers, it could result in another supply shortage.

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