The return of Trump-era jolted American economy with new US tariffs, reinforcing the trade war with China. The US tech industry, based on a fragmented supply chain and a Laissez-faire approach, also became a victim of Trump’s executive orders. The hardware giants are grappling with rising costs, and the semiconductor ecosystem is facing indirect tremors. Meanwhile, software companies are bracing for a potential international backlash. Once seen as untouchable ‘Magnificent Seven’ are also troubled by economic nationalism and geopolitical chess moves. Overall, it could be said that Trump’s tariff hit hardware companies ‘hardest’, semiconductors ‘semi’, and software companies got a ‘soft’ blow. 

Impact of New US Tariffs on the Hardware Industry 

US newly imposed Tariffs on imported goods have majorly impacted hardware stocks because most of the tech companies’ supply chain spans heavily in the Asian region, including China, Taiwan, South Korea, and India. These tariffs disrupted the supply chain, impacting these companies. 

Apple remained the primary tech company hit by Trump tariffs, mainly because of its hardware manufacturing in Southeast Asia. Even if tariffs stay in place, the cost of an iPhone could go materially high, directly impacting the number of sales. Moving these supply chains is another gigantic task, especially for the iPhone, the key driver of revenue, with so many parts, made in specific areas, particularly Taiwan, for advanced chips. 

Amazon is another e-commerce tech giant that is impacted by tariffs on retail goods that are primarily imported from China, the country facing 125% tariffs on imports. 

Impact of Trump’s Tariffs on Semiconductor Industry

Annex 2 of Trump’s executive order lists numerous exemptions that have been given to semiconductors and integrated circuits in their raw form. It gives only partial relief to these products. The real issue arises with the end products like smartphones, tablets, computers, and networking equipment that incorporate these semiconductors. These final tech gadgets face significant price hikes due to tariffs, thereby affecting sales volumes and profit margins. 

The real problem is that a major share of these products is assembled outside the US, especially in China and Taiwan, which makes the entire semiconductor ecosystem vulnerable to these trade measures. 

Thus, while raw semiconductors may avoid direct tariffs, the broader industry still faces considerable risks due to the tariffs imposed on finished goods.

Impact of Trump’s Tariffs on Software Industry

The US newly imposed tariffs have exempted services like software subscriptions. Therefore, there is no direct impact on the software industry. However, an overall downturn could reduce demand for subscriptions or the number of users. 

Since the US exports more services than it imports, the real problem lies in potential retaliatory measures from major trading partners like the European Union (EU) and Asia. 

UK had already been pondering the introduction of a Digital Service Tax on major U.S. tech companies like Google and Meta to ensure these firms pay fair taxes on revenues generated within the country. However, with the recent re-emergence of Trump’s tariffs, the situation may escalate. Liberal Democrats’ Treasury spokesperson Daisy Cooper said in March 

“If the government is seriously talking about putting savage cuts in place that will affect disabled people while also giving a tax handout to Elon Musk, Zuckerberg, and other US tech barons, then the Labour government are at real risk of losing their moral compass,”

Magnificent Seven Tumbled, Recovered, Still Shaking 

Trump’s tariffs move sent Magnificent Seven into a sharp fall, followed by a rebound, but the nerves haven’t settled yet as uncertainty still clouds the road ahead. The stocks of Magnificent Seven: Apple,  Amazon, Microsoft, Meta, Nvidia,  Alphabet, and Tesla faced a sharp sell-off, with these seven companies collectively losing approximately $2 trillion in market value. However, with the ‘rally of relief’, these Magnificent Seven regained over $1.5 trillion with individual stock gains ranging from 9.68% to 22.69%. Though these tech giants recovered a significant share of stocks, the tech sector is still under pressure due to low-profit margins and supply chain instability. 

Future of Tech Industry After Trump Tariffs

Trump’s tariffs have injected uncertainty into the US tech industry due to supply chain fragility, economic headwinds, stock shocks, and geopolitical tensions. The future trajectory of the sector will heavily depend on how these tariffs evolve. There could be three scenarios

Scenario One: US Tariffs Persist at Current Levels

If the current tariffs remain in place, the hardware sector will face sustained pressure on production costs and profit margins. Companies like Apple and Dell, which heavily rely on overseas manufacturing, will likely pass increased product costs onto consumers, potentially dampening demand. The low demand will also decrease investment and growth of the overall sector. 

Scenario Two: Tariffs are Increased 

In a situation where tariffs are further augmented, especially if China retaliates with more tariffs, the volatility will amplify. This could push tech companies toward aggressive restructuring of supply chains and may lead to layoffs. It will also cause delays in product rollout, just like Jaguar Land Rover (JLR) suspended shipment and Nintendo postponed Switch 2. The potential risk of retaliatory tariffs could never be excluded. 

Scenario Three: Tariffs are Rolled Back

There is little likelihood that Donald Trump will roll back tariffs on imported goods, particularly considering his track record during his previous term when he initiated a trade war with China and pursued an America First policy. However, if such a scenario occurs that Trump takes back his tariffs on the tech industry, stock prices, particularly for hardware companies, would likely rebound. According to Gartner’s 2024 report, Nvidia ranked as the top semiconductor company in the world and earned the highest revenue. This trend will likely go up if Trump takes back his tariffs. 

Conclusion 

Considering the high tension in Wall Street and the White House, it is likely that Trump will show some relaxation on tariffs, maybe by giving another extension to the tariffs. However, there are no signs of relief for China, which will potentially escalate the trade war. In a nutshell, the US tech industry will require a new strategy in any scenario. Though the tables may turn anytime.