Tech investors should buckle up. President Trump’s tariffs on Mexico, Canada, and China took effect yesterday and the tech sector is bracing for impact.
These trade barriers could send shockwaves through supply chains, jacking up costs for everything from microchips to laptops, as many components are sourced globally. U.S. tech firms might face higher production expenses, squeezing profit margins, and potentially hiking prices for consumers already feeling inflation’s pinch.
On the flip side, tariffs could spark a boom for domestic manufacturers, pushing innovation in American tech hubs. But there’s a catch – retaliatory tariffs from trading partners might slam U.S. exports, hitting software and cloud services hard. As the global trade war heats up, the tech sector’s future hangs in the balance. Can it adapt and thrive, or will it stumble under the weight of new costs?
While there is hope it might just be a brief battle, threats of retaliatory actions and reciprocal escalations could make the following three tech titans the big losers in any trade war.
HP (HPQ)
One of the first tech giants to avoid in this trade war is PC maker HP (HPQ). It relies heavily on global supply chains, sourcing critical components like semiconductors, displays, and printer parts from China for its computers, printers, and IT hardware. Some 40% of HP’s manufacturing also occurs in China.
While an initial tariff of 10% has been imposed on Chinese imports, they could rise as high as 60%, which would drastically increase HP’s production costs. The tech stock would be forced to either absorb the hit, resulting in it slashing its 6.4% net profit margin, or raise prices and risk consumer backlash in a competitive market. Additionally, HP’s assembly plants in Mexico, which produce 15% of its PCs for the U.S., face a 25% tariff, further driving up costs for its American customers.
HP’s annual revenue of $53.7 billion already saw a 4% dip year-over-year due to weak PC demand, and higher prices could worsen this trend. While HP could shift production to the U.S., the transition would be costly and slow, potentially taking years. With its stock down more than 10% year-to-date, HP’s 4% dividend yield offers some cushion. However, these tariffs could seriously dent its profitability and market share.
Tesla (TSLA)
The second stock facing significant blowback from tariffs is Tesla (TSLA) due to its globalized operations.
While Tesla’s Gigafactory in Shanghai produces 50% of its vehicles (around 950,000 in 2024), it primarily serves China and exports to Europe and Asia. It doesn’t ship vehicles to the U.S., so it would feel any tariff pinch there. However, Tesla sources 30% of its battery components and other parts from China, and a tariff on Chinese imports – whether 10% or 60% – could significantly raise production costs for its U.S.-made vehicles, potentially squeezing its 9.2% net profit margin or forcing price hikes.
Tesla also sources 10% to 15% of its North American supply chain components from Mexico, subjecting the EV maker to the 25% tariffs Trump imposed.
TSLA stock is down to $272 per share, a 33% decline in 2025, though shares are still up 35% over the last 12 months. Its stock could fall much further due to these tariff-driven cost increases and market disruptions.
Nvidia (NVDA)
Nvidia (NVDA) is the third tech titan to avoid in the current trade war due to its reliance on a global supply chain. Nvidia’s GPUs, critical for AI and gaming, depend heavily on components sourced from China, where 20% to 25% of its supply chain originates.
A 60% tariff on Chinese imports could sharply increase production costs for chips like Nvidia’s popular H100 chips as well as its newest Blackwell GPUs, potentially squeezing Nvidia’s fourth-quarter 73.5% gross margin, which already dipped from Q3’s 75% margins.
Nvidia manufactures most chips through Taiwan Semiconductor Manufacturing (TSM) in Taiwan, but final assembly and packaging often involve Chinese facilities. TSM just announced a massive investment in new U.S. factories, but they take time to build and won’t be online for some time to come.
Retaliatory tariffs from China, a key market accounting for 15% of Nvidia’s $39.3 billion Q4 revenue, could further hurt sales, as seen during the 2018 trade war when China targeted U.S. tech exports.
NVDA stock goes for $116 per share, down 24% from its January highs, but also below the level it traded at following the DeepSeek AI model revelation. With no dividend to cushion investors, Nvidia’s high valuation of 39 times earnings and 21 times sales makes it especially vulnerable to tariff-driven cost hikes and potential demand slowdowns in a trade war environment.
— Rich Duprey
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Source: Money Morning