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For a week, Silicon Valley’s bet on Donald Trump looked to be turning very bad, very quickly. The hit to complex electronics supply chains made Apple, Nvidia and Tesla among the biggest casualties of the US president’s assault on the global trading system. And with potentially ruinous tariffs looming on computer systems embedded with GPUs — the chips fuelling the artificial intelligence boom — it was possible to imagine the training of the most advanced AI models being driven outside the US.
The temporary stay of execution produced a monumental relief rally that added $1tn to the value of Apple, Nvidia and Tesla. But renewed pressure on tech stocks on Thursday was a reminder that the issues behind the trade upheaval are entirely unresolved.
The US tech industry grew up in the age of globalisation and was thoroughly shaped by it. It always looked like a risk for some of its most prominent leaders to throw their lot in with Maga, whose nativist and isolationist instincts clash directly with many of tech’s interests.
This goes well beyond the electronics supply chains that are most directly at risk from a trade war. Open access to digital markets around the world, along with free international flows of data, have contributed to American dominance of the consumer internet and cloud computing. The US trade surplus in information and communication technology services, for instance, stood at $30bn in 2023, while its surplus in all digitally deliverable services produced a net $267bn benefit.
And that does not take account of the huge profits that US tech groups make from overseas sales that are not captured in the official trade data, such as Apple’s margins on the iPhones it sells in China, or Google’s advertising revenue from internet searches in Europe. The trade crisis made these an obvious target for retaliation — a risk that will inevitably return with any future trade tensions.
Some of tech’s other interests stand in stark contrast to the movement that put Trump in the White House. Silicon Valley has long benefited from being able to tap many of the world’s brightest computer scientists. A very public spat over immigration earlier this year between Elon Musk and Maga champion Steve Bannon was a reminder that this issue is far from settled.
Silicon Valley has also risked a hit to its all-important soft power from its close alignment with Trump’s most divisive policies. The damage caused to Tesla’s sales by Elon Musk’s willingness to risk his personal brand may be an extreme case, but it is a stark warning of what’s at stake.
The techies are betting they can steer Trump for their benefit, and will feel some vindication from his climbdown on tariffs. But hitting the 90-day pause button will not solve the underlying issues that brought the crisis about, or prevent long-term damage from what has transpired.
Washington and Beijing have moved quickly to an all-out trade war that would have greatly alarmed tech investors, had it not been preceded by the far more ruinous prospect of “reciprocal” tariffs. A further decoupling between the two countries will also add to Silicon Valley’s worries that China will accelerate efforts to reduce its remaining dependencies on US technology. The stunning advances made by DeepSeek are held up by US tech executives as a warning of how quickly Chinese companies starved of US technology can still become globally competitive.
Perhaps most damagingly, Trump’s attack on the global trading system is likely to weaken long-term trust in the US as an ally and partner. Silicon Valley’s international customers will look to reduce their reliance on American technologies they believe to be strategically important to national security.
Europe was already looking for ways to foster alternatives to the US-dominated cloud computing infrastructure. China has long wanted to break the US-led approach to setting global tech standards. It hopes to replace them with alternatives that would favour its own tech companies. In future, there will be a readier international market for that gear, as traditional US allies look to diversify their tech suppliers.
The tech bosses and investors who lined up behind Trump will no doubt console themselves that they still made the right bet. A Democratic administration might have tied them up in regulation, making it hard to outpace China.
Perhaps a more fragmented, confrontational world was inevitable, even without Trump’s provocations. But such counterfactuals are beside the point: this is the world they have helped to bring about, for better or worse.
richard.waters@ft.com
