The Trump Administration’s unpredictable stance on tariffs took another twist recently, with a 90-day pause announced on imposing broad tariffs, except for continued duties on Chinese goods. This decision has significant implications for the data center industry, potentially leading to higher prices for goods and materials that could impact the sector’s growth. The administration’s push for U.S. leadership in artificial intelligence (AI) clashes with tariff policies that could disrupt technology supply chains.
Data center industry players have been bracing for potential tariffs since earlier announcements against Mexico and Canada, two major trading partners of the U.S. According to Andrew Batson, head of data center research for the Americas at JLL, tariffs are likely to raise the costs associated with developing and operating data centers. These increased costs may be absorbed by supply chains, developers, or passed on to tenants through higher rents.
While the cancellation of construction projects due to tariffs is improbable, new projects may face delays as developers assess the impact of tariffs, explore alternative products, and communicate added costs to tenants. The rising costs of structural components, such as steel and critical electrical parts, could pose challenges in bringing new data center capacity online at a higher cost.
Cory McNeley, managing director of the technology practice at UHY Consulting, highlighted the operational and financial pressures data centers may face if tariffs persist. Essential materials and technologies for data centers, including semiconductors, networking hardware, and cooling systems, could be impacted by tariffs, leading to increased capital and operational expenditures.
Tariffs could also slow down new data center construction, affecting proposals based on component costs. Customs bottlenecks for critical components like power units or cooling hardware may cause delays, leading to supply chain disruptions and potential fragmentation within the industry.
The uncertainty caused by tariffs could inadvertently regionalize data centers in areas less affected by tariffs, complicating service delivery and compliance. Despite these challenges, the demand for data centers driven by AI, cloud computing, and digital transformation remains strong. Operators are expected to innovate and adopt strategies to navigate through the uncertainties and sustain growth in the long term.
