The TNT (Trump's New Tariffs) Impact on AI
The original article was written by Yue Yeng Fong
While I could root for a roller coaster ride in a theme park, the recent upheavals in the global stock market have rattled even the bravest souls.
President Trump’s latest round of tariffs is shaking up the global AI ecosystem, and the ripple effects are being felt all across, especially in Taiwan, where the benchmark stock index logged its worst ever fall on Monday, down almost 10%.
90% of the world’s most advanced chips, including the main processors inside mobile phones, AI graphics processing units, and computer chips, are made in Taiwan. Shares in TSMC and Foxconn, who are major suppliers to companies like Apple and NVIDIA, each saw share prices drop close to the daily 10% limit, triggering automatic halts, even though semiconductors are currently exempted from the tariffs.
But all is not doom and gloom - while these tariffs create immediate challenges, they also highlight new opportunities for regional collaboration within ASEAN.
The Tariff Fallout: Rising Costs and Supply Chain Disruptions
Trump’s “reciprocal tariffs” are hitting critical sectors for AI development, from semiconductors to cloud infrastructure. Taiwan, as the global leader in advanced chip manufacturing, and ASEAN, with its vital role in assembly, testing, and packaging, are both deeply affected.
Here’s what’s happening:
Chips and Cloud Costs Soar: While semiconductors themselves remain tariff-free, related hardware like servers, networking equipment, and AI-specific systems face steep duties. Data centers in ASEAN countries are already seeing construction costs rise by 15%, delaying critical projects for training AI models.
Supply Chain Fragmentation: Multinational companies are rethinking their reliance on Taiwan and ASEAN for manufacturing. Some are exploring tariff-exempt regions or reshoring production to the U.S., further fragmenting global supply chains.
For enterprises reliant on AI technologies, this means higher costs, slower innovation cycles, and more inefficiencies.
ASEAN’s Intra-Regional Trade: A Path Forward
While U.S. tariffs disrupt global trade flows, they also present an opportunity for ASEAN to deepen intra-regional collaboration. The region has long been a hub for global supply chains, but now it has a chance to strengthen its internal trade networks to mitigate external shocks.
Regional Supply Chain Realignment: Initiatives like the ASEAN Economic Community (AEC) and the Regional Comprehensive Economic Partnership (RCEP) provide frameworks for boosting intra-ASEAN trade. By reducing dependence on U.S. markets, ASEAN can build resilience against external disruptions.
Shared AI Ambitions: ASEAN nations like Singapore, Vietnam, and Malaysia are actively investing in AI development: Singapore leads in AI governance and R&D funding. Vietnam is focusing on chip assembly and testing. Malaysia is scaling its semiconductor strategy to move up the value chain. Collaborative projects across these countries could accelerate innovation while reducing reliance on external markets.
Digital Economy Growth: The ASEAN Digital Economy Framework Agreement (DEFA) aims to triple the region's digital economy to $2 trillion by 2030. This includes investments in data centers, localized AI solutions, and digital infrastructure—all areas ripe for intra-regional partnerships.
By leveraging these opportunities, ASEAN could emerge as a stronger player in the global AI race while providing Taiwanese companies with alternative growth avenues.
Opportunities for Taiwanese Companies
For Taiwan, the tariffs present significant challenges but also open doors for strategic realignment with ASEAN economies:
Relocating Production: Shifting manufacturing to lower-tariff ASEAN countries like Indonesia or Malaysia could help Taiwanese firms maintain competitiveness while avoiding U.S.-imposed duties.
Partnering with ASEAN on AI Development: Taiwan’s expertise in chip design complements ASEAN’s strengths in assembly and testing. Joint ventures could accelerate innovation while mitigating tariff impacts.
Tapping Into Regional Growth: With initiatives like DEFA driving digital transformation across Southeast Asia, Taiwanese companies have an opportunity to expand their presence in a rapidly growing market.
What This Means for Enterprise AI
For enterprises relying on AI technologies:
Costs Will Keep Rising: From GPUs to cloud services, everything is getting more expensive due to tariffs and supply chain disruptions.
ASEAN Could Be a Lifeline: With strong intra-regional trade frameworks and growing digital economies, ASEAN offers an alternative pathway for sourcing components or developing localized solutions.
Taiwan Must Adapt: As a critical player in the semiconductor space, Taiwan will need to diversify its production bases and deepen ties with regional partners like ASEAN to navigate these challenges.
Looking Ahead
The U.S.’s tariff policies are reshaping global trade dynamics in ways that will have lasting implications for the AI industry. But while these disruptions create challenges, they also open doors for new partnerships and strategies:
For ASEAN nations, this is an opportunity to deepen regional integration and reduce reliance on external markets.
For Taiwan, it’s a chance to align with Southeast Asia’s growing tech ecosystem while maintaining its leadership in chipmaking.
The future of enterprise AI will depend on how businesses adapt to these shifting dynamics—and whether they can find opportunity amid the chaos.
AIBP has been driving digitalisation ecosystems in Southeast Asia since 2012. If you would like to access information about business, technology and innovation in Southeast Asia, follow us at our LinkedIn Page or reach out to me to include yourself in our newsletter
