Ursula von der Leyen, the president of the European Union, recently hinted that the EU might impose retaliatory tariffs on US digital products. This development could significantly impact IT leaders trying to implement digital and AI strategies. Despite a 90-day reprieve from the White House, current tariffs are already affecting manufacturers exporting to the US.
Tech executives are scrambling to adjust their sourcing strategies. The ongoing trade tensions between the US and China have created a complicated environment, especially for companies reliant on global supply chains including production in China, Taiwan, South Korea, and Southeast Asia.
As these tariffs unfold, costs for data center equipment are expected to rise, affecting both on-premise and public cloud purchases. Lee Sustar, a principal analyst at Forrester, commented on the immediate effects: cloud providers could face supply chain price shocks. Even these bulk buyers of materials—like chips and cables—may struggle with rising costs, threatening their ambitious plans, such as Microsoft’s $80 billion investment in AI data centers.
Both Dell and HPE are adapting to these challenges. Dell’s COO, Jeff Clarke, believes their global supply chain will help mitigate the tariff impacts. Meanwhile, HPE’s CFO, Marie Myers, stated they are plotting ways to manage uncertainties stemming from tariffs, particularly affecting their server sales. HPE’s CEO, Antonio Neri, is also preparing for necessary price adjustments.
Lenovo is touting its ability to move customer orders and relying on its comprehensive supply chain management. The company’s strategy includes sourcing materials from various countries to reduce dependence on China and Taiwan.
Google Cloud’s parent company, Alphabet, and other major cloud providers like Amazon and Microsoft haven’t publicly addressed tariffs in their recent earnings calls. However, Forrester’s Mark Moccia suggests that all public cloud providers are likely to see rising costs due to the tariffs. He notes that prices for PCs, IT infrastructure, and cloud services will likely increase in the coming months. The potential for delayed projects due to budget constraints is a concern for CIOs as they navigate these challenges.
Moccia advises IT leaders to strategically analyze costs, diversify suppliers, and focus on priority projects to ensure their AI initiatives remain viable. While public cloud services aren’t currently under tariffs, fluctuations in underlying costs could lead to increased prices down the line.
There’s an interesting opportunity here. IT leaders might use the 90-day grace period to negotiate more favorable contracts with hardware suppliers and cloud providers before new tariffs take effect. Canalys has reported a recent uptick in PC shipments as IT buyers rush to refresh their equipment ahead of potential price hikes. Fast-tracking orders for data center infrastructure or securing reserved cloud instances now might be a savvy move to avoid paying more later.