Tariff and trade policy in the United States is poised to affect nearly every industry, and data centers are no exception. Data centers built in the United States need to be outfitted, and much of that equipment comes from outside the United States and would be affected by US import controls and regulations. Import controls may involve quotas or other restrictions on what may be imported into the country or the imposition of tariffs on imported merchandise. Tariffs that are currently imposed under various trade measures, and anticipated additional tariff and non-tariff remedies resulting from trade investigations, will influence data center construction, hardware manufacture, software development, and energy consumption.
The United States imposed global reciprocal tariffs pursuant to the International Emergency Economic Powers Act (IEEPA) effective April 5 at a 10% baseline, which was set to increase for certain trading partners on April 9 before being paused for 90 days for most trading partners. Tariffs on Chinese-origin merchandise have continued to climb, reaching 125% under the reciprocal tariff regime, which are added to a 20% fentanyl-based IEEPA tariff and Section 301 tariffs ranging from 7.5% to 100% on Chinese-origin imports. Semiconductors, semiconductor manufacturing equipment, and certain derivative products were excepted from application of the reciprocal IEEPA tariffs, though such equipment was specifically identified as potential targets of additional tariff action in an effort to promote US semiconductor and AI-related manufacturing.
Recent Trade Investigations Could Impact Data Center Construction and Operation
Data center construction is dependent on key materials like steel and aluminum, which, in addition to identified steel and aluminum derivative articles, are subject to a 25% tariff pursuant to Section 232 of the Trade Expansion Act of 1962 (Section 232), which allows the president to impose tariffs if an article is being imported into the United States in such quantities or under such circumstances as to threaten or impair US national security. These Section 232 tariffs on steel, aluminum, and derivative articles have been in place since 2018, though importers initially had the opportunity to apply for and receive exclusions that would exempt certain products from the tariffs, and certain countries had negotiated tariff rate quotas where merchandise under the quota threshold could be imported tariff free. Those exclusions, exemptions, and quotas were terminated effective March 12, and no new process has been opened.
There are also ongoing Section 232 investigations that could impact data center construction and operation—one involving semiconductors and derivative articles, and one involving critical minerals and derivative articles.
On April 16, the Bureau of Industry and Security published a Notice of Request for Public Comments on Section 232 National Security Investigation of Imports of Semiconductors and Semiconductor Manufacturing Equipment. Comments from interested parties will be due only 21 days after publication (by May 7).
The investigation is concerned with semiconductors, semiconductor manufacturing equipment (SME), and derivative products. Interested parties are invited to submit written comments, data, analyses, and other information concerning specific topics outlined in the investigation announcement, including current and projected US demand for semiconductors, the extent to which domestic production can meet that demand at each node size, the role of foreign manufacturing in meeting US demand, the impact of foreign trade policies on US supply chains, US import reliance, and other relevant factors.
The investigation into critical minerals and their derivatives invites interested parties to provide information on a similar list of topics, including identification of US imports of processed critical minerals and derivatives, foreign sources for such imports, an analysis of market manipulation strategies by foreign countries, viability of US production, demand for products in the US and globally, the dollar value of current imports, and other relevant factors.
Under Section 232, as amended, the Secretary of Commerce investigates the effect of imports (here, imports of critical minerals and their derivatives) on US national security. Once an investigation is initiated, the Secretary of Commerce must deliver a report to the president within 270 days, focusing on whether the importation of the article in question is in such quantities or under such circumstances as to threaten to impair the national security. The president can concur or not with the Secretary’s recommendations and may take action to “adjust the imports of an article and its derivatives” such as imposing new tariffs or import quotas (restrictions). The report may be submitted earlier than 270 days, and the administration has vowed to work quickly in these newly initiated trade investigations.
The identification of semiconductor derivative and critical mineral derivative products seems quite expansive. Commerce will not reach out to parties to request information, so companies are strongly encouraged to voluntarily submit comments if they may be impacted by new tariffs or import quotas on semiconductors, SME, critical minerals, or derivative products imported into the United States.
Global Trade Discussions May Lead to Increased Costs and Delays
Meanwhile, American businesses that sell equipment used in data centers overseas may face responsive tariffs from foreign customs authorities resulting from US tariff strategy. Their US-origin products could become subject to reciprocal or responsive tariffs for imports into foreign countries and restrictions might be placed on exports of advanced technology to the United States.
The currently imposed tariffs on steel, aluminum, and derivative articles and anticipated tariffs on semiconductors, SME, critical minerals, and derivative articles will continue to increase materials costs and exacerbate supply chain delays due to limited availability of key components, as these policies affect not only the materials needed for the physical building but also for critical systems. The dual pressures of increased costs and materials shortages will impact data center operators, who may pivot from suppliers in China to those in southeast Asia, Mexico, or the United States. However, nearshoring and onshoring critical manufacturing is a years-long process that is complex and capital intensive. It is unlikely that manufacturers can adjust within the timeline of anticipated trade investigations, and certainly not within the days-long time frames under which the administration has imposed IEEPA-based tariffs.
Additional costs might not deter large firms chasing an AI breakthrough, but they could pose additional hurdles for those seeking lower-cost alternatives. Escalating trade wars could lead to increased project expenses or delays in light of supply chain disruption. The US administration has been pushing for the development of US data centers and AI technology since President Trump’s second term began. While none of the announced tariff actions has included specific exclusion processes, perhaps any new measures will carve out certain equipment used in data center supply chains.
Our legal team is closely monitoring executive orders and updates from the White House. Below are resources to help navigate the US administration’s executive orders—including their scope, potential implications, and tips on how to prepare. Check out our Executive Order Tracker for more information. If you have any questions, please reach out to Casey Weaver or Katelyn Hilferty or our US Administration Policies & Priorities team.