Trump's tariff turmoil leaves IT projects in deep freeze

Investment delays are inevitable as uncertainty clouds US trade policy, warns investment bank

World War Fee Trump administration tariffs are leaving the IT industry in "limbo", with CIOs hitting the pause button on new projects as they're unsure whether budgets set today will be disrupted by taxes tomorrow.

Investment bank and capital market watcher Jefferies this morning published a report deliving into the US President's trade tariff policy, in which punitive import taxes are imposed and later temporarily withdrawn. This means that the only certainty is uncertainty for tech industry chiefs trying to figure out how to prioritize investments.

In a new report, shared privately with The Register, Jefferies points out that even with the "pause" announced last week, tariffs remain higher than at the start of the year.

The research note states: "It seems unlikely we can snap back to the 'normal' cadence of decision making and it seems inevitable some decisions will push to the right," meaning they will be postponed.

"We see IT as a structural growth industry, but one where the timing of new business decisions can get deferred," Jefferies says. "In our view, the pause in tariffs and now exemptions on electronics doesn't remove all business uncertainty. This creates earnings risk across the sector."

IDC's EMEA VP for Devices, Francisco Jeronimo, noted that the US administration's decision to exempt key products such as smartphones, tablets, and PCs from reciprocal tariffs "highlights a clear recognition of the economic shock such duties would deliver to American consumers, some of the most popular consumer electronics brands, and the broader tech industry."

There are unconfirmed reports suggesting some major IT vendors, including HP, Dell, Lenovo, and Apple, may have temporarily suspended shipments of products such as PCs from China to America.

This follows reports last week that many of the same companies benefited from a surge in shipments during the first quarter of 2025 as distributors and resellers stockpiled kit in the US before the tariffs took effect.

"The reality is that major US technology companies remain heavily dependent on China's highly efficient and deeply integrated manufacturing ecosystem," Jeronimo said.

"This deep integration leaves these companies highly exposed to disruptions stemming from trade policy shifts. Even for companies actively pursuing diversification, China often remains the primary source for these complex, high-volume products due to the sheer scale and efficiency challenges elsewhere," he added.

How can companies in the tech sector, such as datacenter operators, hedge their bets amid all this uncertainty? Jefferies warns there are few hiding places. "In our experience, existing contracts are rarely cancelled. However, new business decisions can be deferred and this is true across the sector," its report states.

"Who can know what the US administration will do next?" asked Alan Howard, principal analyst for colocation and DC building at Omdia.

"I have talked to a couple of equipment vendors who have basically said they don't know how things will play out considering a lot of equipment traverses multiple countries before landing at the final consumer. The only conclusion I've heard so far is prices will go up for consumers of that equipment to defray the additional costs. I doubt that sentiment is shocking to anyone," he commented.

Andrew Buss, senior research director for IDC's European Enterprise Infrastructure program, said the current trade situation is very hard to guard against, particularly when the implementation is shotgun in style and unpredictable.

"Most western technology companies have invested heavily in optimized global supply chains with lean inventories and just-in-time ordering and delivery. This blunt approach with tariffs is anathema to lean supply chains, so will add significant inventory costs to many companies to buffer against constantly changing policies," he told us.

This is just one aspect of managing international supply chains and manufacturing, Buss added. "Rules of origin is another worry as it presents the opportunity to apply tariffs multiple times to components as they are integrated into larger and larger assemblies in different locations before integration into the final product."

The bottom line is that in times of major uncertainty, businesses will keep a tighter grip on their purse strings. And if tech buyers can't see how much infrastructure and other resources are going to cost them, then they can't accurately forecast return on investment, and so are going to put some projects on ice, at least for the time being. ®