Blanket Semiconductor Tariffs Would Weaken U.S. Growth and Tax Computing Power, ITIF Warns

WASHINGTON—Blanket tariffs on semiconductor imports would raise prices for consumers, make digital tools more expensive for businesses, and slow U.S. economic growth, according to the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy. In a new report released ahead of an expected semiconductor tariff announcement, ITIF warns that broad Section 232 tariffs would weaken the very economy they are meant to advance.

“Tariffs may look like a shortcut to more domestic chip production, but for an input this critical to the economy, they function more like a tax on computing,” said Trelysa Long, policy analyst at ITIF and co-author of the report. “Chips power the products Americans buy, the tools businesses use, and the infrastructure supporting AI. Raising their cost would not just affect semiconductor companies; it would lead to higher prices, weaker investment, and add more pressure on consumers’ wallets.”

The report models the economic impact of possible blanket semiconductor tariffs at three levels. The results point in the same direction at every level: Blanket semiconductor tariffs raise the cost of information and communications technology (ICT), reduce consumption of digital goods and services, weaken capital investment, and cut GDP growth.

• At 10 percent, semiconductor tariffs would raise ICT prices by 7.6 percent, reduce ICT consumption by $4.2 billion, and cost the U.S. economy a cumulative $497 billion over 10 years. For the average American, the report estimates a cumulative $1,454 loss in GDP per capita growth over the same period.
• At 25 percent, semiconductor tariffs would raise ICT prices by 22.6 percent, reduce ICT consumption by $12.5 billion, and cost the U.S. economy a cumulative $1.6 trillion over 10 years. For the average American, the report estimates $170 less in GDP per capita growth in the first year and a cumulative loss of $4,825 by year 10.
• At 50 percent, semiconductor tariffs would raise ICT prices by 47.6 percent, reduce ICT consumption by $26.3 billion, and cost the U.S. economy a cumulative $4.4 trillion over 10 years. For the average American, the report estimates a cumulative $12,825 loss in GDP per capita growth by year 10.

Levying tariffs on semiconductors is especially risky because chips are not ordinary traded goods; they represent core inputs empowering artificial intelligence, cloud computing, telecommunications, advanced manufacturing, automobiles, aerospace, and defense systems. Raising chip costs would make it more expensive to adopt new technology across the economy, including the data center infrastructure driving America’s AI leadership. AI investment has become a meaningful driver of U.S. growth, accounting for 1.2 percent of GDP in 2025, with the top five hyperscalers on track to invest $1 trillion by 2027. Semiconductors constitute a major part of that buildout, accounting for more than half the cost of building and operating an AI data center, especially as the largest hyperscale facilities require hundreds of thousands of chips.

ITIF strongly urges the administration to avoid levying broad Section 232 semiconductor tariffs, and to reduce extant tariffs on semiconductors to the maximum extent possible. Congress should also extend the 35 percent semiconductor investment tax credit through 2030 and expand it beyond manufacturing to include firms investing in semiconductor research and design. If the administration continues to misuse Section 232 tariffs, Congress should retake its authority and require annual reviews and automatic expiration dates so tariffs only remain in place when they improve national security without imposing undue economic harm.

“It’s a false choice to say policymakers have to choose between ignoring the semiconductor challenge and taxing the chips U.S. companies rely on,” said Meghan Ostertag, policy analyst for economic policy at ITIF and co-author of the report. “There is a path to building semiconductor capacity in the United States without raising the cost of innovation across the rest of the economy. The Administration should use smart incentives to make America more competitive.”