Tariff uncertainty looms large over budget conscious CIOs

It’s a feature not a bug, and what the US electorate voted for, says analyst

Updated As US president Donald Trump's inauguration passes into history, tech leaders face uncertainty as they wait to see if repeated promises of global US import tariffs are put into action.

Both the CIO and the largest vendors will be watching keenly to see how populist rhetoric is manifested in US policy, says Gartner. Recent estimates from Consumer Technology Association suggest the price of laptops could rise between 45 percent and 68 percent if tariff policies are enacted.

This is what the American public voted for. This is how Trump intends to govern, so we're not in an abnormal state

While the prospect of tariffs on imports from China and other countries in the far east could affect hardware prices across a range of categories, a similar move against the EU and other European countries could affect software and services. US retail giant Walmart, for example, relies heavily on SAP for its ERP systems.

Speaking to The Register, John-David Lovelock, distinguished VP analyst at Gartner, said: "There is going to be a very dynamic market. The things that are happening right now with forecasting or promoting the idea of tariffs but being vague on what they are, being vague on the rates, letting the market get into this frantic state of concern. This is a feature, not a bug. This is what the American public voted for. This is how Trump intends to govern, so we're not in an abnormal state."

However, Gartner is optimistic on IT spending during 2025. It forecast an overall increase of 9.8 percent in worldwide IT spending in 2025, to reach $5.61 trillion. The highest rate of growth remains in datacenter spending, at 23.2 percent to $405 billion.

Lovelock predicted uncertainty would remain throughout the year. "At a certain point, it won't matter because budgets are budgets, and budgets have been set, and CIOs will spend their budget. What becomes the open question is how much value will they get? Because if I have to pay 25 percent more for my PCs, I'm still going to spend my PC budget, I'm just going to have fewer new PCs.

"So, in one sense, it doesn't matter if the forecast is the forecast because it's based on budgets, expectations and market mechanics. On the other hand, it matters very much to who's going to be able to make that money and how much value CIOs will be able to extract for their dollars," he said.

Ultimately, US cloud and social media platform giants rely on the hardware that powers their datacenters, but their leaders were reluctant to come forward and offer their assessment at the prospect of Trump tariffs following his November election victory.

While the objective of the tariffs may be to bolster US manufacturing, that cannot happen overnight. It takes years to build a chip fab, even if there are the engineering skills to do so, which Register writers discussed late last year.

"It's noise versus signal. The signal is the economy [and it] is doing well: it's not helping; it's not hindering. Companies are turning to revenue growth, recognizing that they have to build it themselves. The tariffs are the noise that they have to deal with while they're executing this strategy, and it does mean that they are going to be a little bit more timid until there's more certainty, and they will be more bold once they have some. It will be much more of a start and stop level of spending this year rather than [a] smooth one," Lovelock said. ®

Updated at 13.33 UTC on January 22, 2024, to add:

This morning, Trump threatened the European Union with tarrifs as the bloc has a trade surplus with the US. "The European Union is very, very bad to us," he told reporters. "So they're going to be in for tariffs. It's the only way ... you're going to get fairness."