The booming data center sector grapples with tariff chaos

Recent weeks have stress-tested global markets’ ability to operate amidst a tempest created by radical trade policy moves (see Tariff recap below). While the shock-and-awe treatment has been unprecedented in its scale, speed and non-linearity, so far, the learning points for all, including those in the data center industry, are mostly reminders of truisms rather than genuinely new lessons:

• Unpredictability is damaging for businesses and financial stability. While uncertainty and risk are inherent in business and financial market mechanisms, they are typically calculated into decision making and within tolerable levels. The events leading up to and following the US administration’s “Liberation Day” announcement on April 2 far exceeded those tolerances. Business plans agreed in the morning became invalid by market close, some business executives disclosed to Uptime Intelligence. Ultimately, the turbulence has culminated in US Treasury bonds — supposedly the bedrock of the global financial system — losing ground, unravelling trade positions and unsettling global financial markets.
  This deep-rooted turbulence may, indirectly, have an effect on some data center projects, although it will take a bit longer for those decisions to crystallize. The fact that the data center sector is already in the midst of a period of unprecedented growth and exuberance, and already over-stretched, makes any assessment of the current situation more complicated.
• Tariffs are stagflationary when geopolitically weaponised and unpredictable on a global scale. This means that prices will, on balance, settle higher, as tariffs are effectively a tax on the cross-border movement of goods. The inflationary effect of high tariffs will be stronger this time than in the past now that supply chains are more global. Data center equipment, with its long lead times and waiting lists, will be no exception. Major suppliers have revealed to Uptime Intelligence that they will gradually raise their prices by mid-April. Even if the full impact of these price increases is not passed on, or if tariffs are lower than feared, suppliers need to move to protect themselves.
  At the same time, tariffs will almost certainly suppress economic growth through deferred or reduced investments and consumption. Businesses tend to pause capital projects to reassess their business plans vis-a-vis market conditions. The possibility that some tariffs may be short-lived, as already demonstrated by exemptions and pauses, exacerbates the uncertainty as investments, including some data center projects, may be put on hold.
  There is a widespread belief within the data center industry (confirmed through multiple interviews) that these tariffs are unlikely to last and the storm will eventually pass. The macro-risk, however, is that high tariffs — and the ongoing risk of higher tariffs — will potentially develop into a toxic economic blend of inflation and stagnation in several major economies.
• Consequences of shockwaves are profound and long-lasting — but difficult to predict. The economic shockwaves from the US trade policy moves will reverberate for years to come as businesses, financial markets and governments gradually readjust to the new calculus, assuming lower levels of political and trade stability.
  Although adapting to ever-changing tariffs is challenging, efforts to reconfigure supply chains have been (and are being) actively formulated to redirect the flow of goods, including not only finished systems, but electrical and mechanical components. Highly globalized and complex items, such as data center facilities equipment, which rely on multiple diverse suppliers and manufacturing options, can be manipulated strategically to reduce tariffs and alleviate bottlenecks. But this could result in delays stemming from temporary dislocations in the supply chain — not just components, but containers and shipping as well.
  These are only the first actions in response to a shockwave; the repercussions that follow will be more significant. Exactly how the economic climate, particularly the relative appeal of competing global regions for technology investment, will evolve over the coming months and years remains a matter of speculation. Future investment incentives, trade and regulatory policies are notoriously difficult to anticipate.

For the data center industry, the key takeaway of the first two weeks of April 2025 is clear: the case for increased self-sufficiency has never been stronger. This self-sufficiency will span technology development and control over key intellectual properties; data center infrastructure sovereignty for economically critical services; and broader and deeper supply chain resiliency.