- President Donald Trump is threatening to impose tariffs on Taiwanese-made chips of up to 100%.
- That could be bad news for Nvidia, which relies on Taiwan’s TSMC for its chip supply.
- On Monday Nvidia saw 17% wiped from its value in a market rout triggered by China’s DeepSeek.
President Donald Trump’s pledge to impose tariffs on Taiwan-made semiconductors could deal a fresh blow to Nvidia after its shares dropped by 17% 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,” said Trump, seemingly in a swipe at US firms who source processors from TSMC.
Trump said companies would not 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 currently 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. Nvidia has been left reeling after the release of an AI model from Chinese startup DeepSeek caused it to lose $589 billion in market value on Monday.
Investors reacted with panic amid fears that Nvidia’s chips may face a decline in demand because 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 than those used by the ChatGPT maker.
An Nvidia spokesperson declined to comment.
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It is unclear if Trump will proceed with tariffs on Taiwan, but US leaders have increasingly exercised caution about dependence on the Far East nation for chips.
China has long overshadowed the independently governed island with the prospect of invasion, and 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-based 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 adviser with the Center for Strategic and International Studies, told Yahoo Finance last year after Trump floated imposing tariffs on a podcast.
“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 pledge by pointing to the “complementary” relationship between the Taiwan and US economies.
“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,” Taiwan’s economy ministry said in a statement, reported Reuters.
AI is among the sectors where the US and China are in an intensifying battle for global technological dominance. On January 21, Trump announced a $500 billion initiative to boost AI infrastructure in the US alongside OpenAI, SoftBank, and Oracle.
TSMC did not immediately respond to a Business Insider request for comment.
