The Trump Administration’s tariff plans have been a rollercoaster ride of uncertainty. On April 9, a 90-day pause on far-reaching tariffs was announced, excluding steep duties on Chinese goods. This decision has significant implications for the data center industry, where higher prices for goods and materials could impact the sector’s growth.
The administration’s focus on U.S. leadership in AI clashes with its tariff policies, which could disrupt technology supply chains. Data center industry players have been bracing for potential tariffs since February when they were proposed against Mexico and Canada, two major trading partners.
Andrew Batson, head of data center research for the Americas at JLL, highlighted how tariffs will raise the cost of developing and operating data centers. He mentioned that these increased costs could be absorbed by supply chains, operators, developers, or passed on to tenants through higher rents.
While the cancelation of construction projects due to tariffs is unlikely, new projects may face delays as developers assess the impact, explore alternative products not subject to tariffs, and communicate any additional costs to tenants. Despite these challenges, Batson believes that the long-term demand drivers for the data center sector remain intact.
Jon Guidroz, senior vice president of commercialization and strategy for Aalo, expressed concerns about rising costs of structural components like steel and critical electrical parts. These cost increases could make bringing new data center capacity online more challenging and expensive.
Cory McNeley, managing director of the technology practice at UHY Consulting, emphasized that ongoing tariffs could create operational and financial pressures for data centers. Materials and technologies essential to data center development and operation, such as semiconductors and networking hardware, could be significantly affected.
Tariffs may also impact new data center construction, leading to cost volatility and schedule delays depending on the components used. McNeley warned that potential economic and supply chain disruptions could result in fragmentation within the supply chain and compatibility issues with certain technologies.
Despite the uncertainties caused by tariffs, John Dinsdale, chief analyst at Synergy Research Group, remains optimistic about the data center market’s long-term prospects. He noted that while short-term road bumps are expected, the underlying market drivers remain strong.
Guidroz added that the data center market’s resilience stems from high demand for AI, cloud computing, and digital transformation. Operators are likely to adopt innovative sourcing strategies to absorb short-term cost increases driven by digital infrastructure expansion.
McNeley predicted that consumer and commercial demand for data services will continue to grow, with larger service providers like AWS, Microsoft, and Google able to absorb short-term costs. He emphasized the importance of scaling up remote support and cybersecurity initiatives in response to increased demand for AI-based services.
In conclusion, while tariffs pose challenges for the data center industry, operators are adapting to mitigate any potential impacts. The sector’s long-term growth prospects remain positive, driven by strong market drivers and innovation in digital infrastructure expansion.
