Although President Donald Trump has named support of the U.S. artificial intelligence (AI) industry as a goal of his administration, some experts are concerned that his tariff plans might impact AI development here.
Alan Gin, economics professor at University of San Diego and expert in Asian economic development and Chinese business, is one of them. This week, he joined Audacy station KCBS Radio to discuss what might be coming for the world of AI amid the tariff war.
“What’s happening now is there’s a lot of investment in what are called AI centers around the country, and so those need to be built out and a lot of equipment is needed to develop those things – and a lot of that equipment comes from China and other countries overseas,” he said.
China has been one of the main targets of tariffs imposed by the new administration, and it has retaliated quicker and more aggressively than other nations. As of Tuesday, White House Press Secretary Karoline Leavitt said: “The ball is in China’s court. China needs to make a deal with us. We don’t have to make a deal with them,” regarding the president’s stance on the tariff status, Bloomberg reported.
In the U.S., semiconductors such as graphics processing units needed to develop AI are often imported from China, Gin explained. Therefore, they are subject to tariffs imposed on Chinese imports by the U.S., which result in U.S. companies paying higher prices for those items.
While Gin noted that there was an exemption announcement over the weekend for electronics, including things like computers, smartphones, and semiconductors, Bloomberg reported Monday that Trump “pledged he will still apply tariffs to phones, computers and popular consumer electronics, downplaying a weekend exemption as a procedural step in his overall push to remake U.S. trade.
“In addition to that, you need equipment like generators switches and transformers then to… power them these, these centers,” Gin said of the U.S. AI industry. That equipment also often comes from China.
Last week, Audacy reported on how the manufacturing semiconductors used in electronics has been an area of focus for Trump and his plan to bring more manufacturing back to the U.S. However, Willy Shih, professor of management practice at Harvard Business School, said it would take around a decade and $500 billion to get the U.S. manufacturing sector ready to meet semiconductor demand. At the same time, he said increased automation is one way that the U.S. might be able to ramp up its manufacturing output.
“It could take a long time for that to happen,” Gin said this week of the U.S. developing certain tech materials to fuel AI manufacturing. “To build one of these chip manufacturing things, or what they call fabs, would take anywhere from three to five years. So even if we start today, it would take a while. And then you’ve got to ask the question: ‘Will businesses commit to a three to five-year project when there’s so much uncertainty about what’s happening, when policy could just change on a whim?’”
Overall, Gin said this uncertainty is what he’s most concerned about.
“It’s tough right now because both sides seem to be dug in and even escalating the situation,” he explained, referring to China and the U.S. “China has indicated that they’re no longer going to increase their tariffs. They’ve bumped their tariffs up to 125% against U.S. products. So, it’s uncertain how the response of the administration is going to be.”
Meanwhile, AI is also a growing industry in China.
“They are less dependent on us and then we are on them in terms of building up these AI centers,” said Gin. “In fact… what some people are rejecting is that with these tariffs on things coming into the U.S. that will increase the cost of doing business of constructing these things in the U.S., and that might lead into development of the AI centers in other countries.”
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Going forward, he recommends that the U.S. negotiate with China in a way that allows that country to save face.
“I think the problem is that the administration might have backed China into a corner, and the Chinese don’t like that,” he said. “You have to give them a way out to allow them to save face, and so I think that’s why you’re seeing the response from China.”
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