Trump, Tariffs, and Data Centers: Uncertainty Reigns – For NowTrump, Tariffs, and Data Centers: Uncertainty Reigns – For Now

The Trump administration’s plans to impose wide-ranging tariffs on the US’s neighbors Mexico and Canada, along with additional tariffs targeting Chinese goods, are in flux. So, too, is the impact a potential trade war might have on the global data center and digital infrastructure industry.

Over recent days, the administration announced a 25% tariff on goods from Mexico and Canada, with Canadian energy resources facing a lower 10% tariff. Chinese goods would be hit with a 10% tariff. President Trump said the measures against Canada and Mexico were necessary to stem illegal immigration and drug trafficking.

On the morning of February 3, a day before the tariffs were due to take effect, Mexico’s president Claudia Sheinbaum reached a deal with President Trump to stave off the measures – at least temporarily – by agreeing to boost Mexico’s military presence on the US border.

Later in the day, following a call between Trump and Canadian Prime Minister Justin Trudeau, the tariffs targeting the US’s northern neighbor were also put on hold for 30 days.

The two countries were reportedly weighing retaliatory measures of their own, sparking concerns about a trade war that could spread globally.

What Impact Could the Tariffs Have on Data Centers?

The US Federal Reserve urged caution as uncertainty surrounding when, if, and for how long the tariffs would last. However, any negative impact on interest rates or energy costs could impact the data center market.

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Higher interest rates could make construction more expensive, while prices of raw materials – including lumber and oil from Canada – could rise, impacting building costs and energy expenditures.

The global tech trade association ITI released a statement calling for the administration to “avoid trade restrictions and weakened North American economic ties to the extent possible and roll back the tariffs when outcomes are achieved”.

Any hurdles to data center construction could further impact tech companies struggling to meet customer demand. Just last month, Microsoft’s CFO said the company’s cloud growth is being hindered by data center capacity constraints, limiting its ability to meet customer needs.

‘Far Too Many Unknowns’

John Hodges, a lawyer at Washington, DC-based HWG, said trade restrictions could raise the price of critical materials and energy sources, affecting both data center construction and operations.

Beyond supply chain concerns, energy costs are emerging as a major issue for data centers.

“Energy consumption in data centers is exponentially growing,” Hodges said. “Anything that increases energy costs moves in the opposite direction of industry goals to improve efficiency and reduce operational expenses.”

Related:Decoding Data Center Efficiency Metrics: A Guide to Energy and Sustainability

Higher energy costs could force data center operators to reconsider their power-sourcing strategies, particularly as they seek cheaper and more sustainable alternatives.

While nuclear energy and renewables have long been discussed as options for large-scale data centers, tariffs may accelerate the transition.

“I don’t know if this will create a tipping point toward nuclear or alternative sources,” Hodges said. “But it certainly pushes in a direction that makes cost reduction harder for operators who are already highly dependent on stable, reasonably priced energy sources.”

John Dinsdale, chief analyst at Synergy Research Group said there are far too many unknowns to be predicting the impact of any tariffs.

“We seem to be plowing ahead while no one knows what the endpoint might be or what might happen in the meanwhile,” Dinsdale told Data Center Knowledge. “What is for certain is that business – and the stock market – hates uncertainty. That doesn’t help anybody.”

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Concerning data centers specifically, Dinsdale said he felt that significant short-term damage is unlikely.

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“Data centers will keep on doing what they are supposed to do and committed construction plans and supply contracts will continue to progress,” he said.

Beyond that?

“Data centers have been viewed as a safe haven for investments and in a general sense that is unlikely to change, but there could be all sorts of road bumps that have to be navigated,” Dinsdale said.

Hodges said that despite concerns, he also remains cautiously optimistic that data center expansion will continue.

“We’ve seen a huge movement toward data center development worldwide,” he said. “I don’t know whether these tariffs will be enough to slow that down, but they certainly add another layer of complexity.”