Tariffs and Global AI Supply Chains
After the 2024 U.S. elections, the U.S. reintroduced high tariffs on tech imports.
This made AI hardware more expensive to import, increasing costs for building AI infrastructure in the U.S.
The tariffs now cover up to 27% of key components like AI chips and accelerators.
These changes are disrupting the global tech supply chain and may push companies to build in cheaper locations — even in China.
Economic Impacts of Tariff Policies
Tariffs aim to boost local production but reduce global efficiency and slow innovation.
AI progress depends on fast innovation and global collaboration, which tariffs undermine.
Tariffs reduce access to advanced technology, increasing infrastructure costs and slowing productivity.
AI needs large power infrastructure; if the U.S. fails to meet these demands, it could fall behind in the AI race.
India’s Strategic Position
India may benefit by becoming a “third option” between the U.S. and China.
India has low labour costs, a growing AI sector, and 1.5 million engineering graduates annually.
The government is investing in AI research and semiconductor manufacturing.
However, India still relies heavily on imported hardware, which could hurt if global prices keep rising.
Shifts in AI Development Models
Companies are adapting to rising costs by making more efficient software and custom AI chips (application-specific integrated circuit (ASIC)).
This could lead to more decentralised AI development, similar to how personal computers replaced mainframes in the 1980s.
Countries with lenient regulations and large digital populations, like India, could turn this to their advantage.
While infrastructure becomes costlier, smarter algorithms may keep AI tools affordable for consumers.
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