The Trump White House this week put aside its customary allergy to foreign goods and celebrated a huge jump in imports.
No, President Donald Trump has not switched to the globalist team. He remains an avowed tariff fan and still wants offshore factories to relocate to the United States.
But that won’t happen quickly, if ever. So the administration is welcoming a surge of foreign products as a sign of progress in developing the artificial intelligence industry. Business investment — much of it linked to the AI boom — rose by more than 10 percent in the first quarter, the biggest leap in three years, the Commerce Department said Thursday.
Most of the computer servers, fiber optic cables and cooling equipment needed to build AI’s massive data centers come from abroad. Even some of the construction materials used to erect the warehouselike structures are foreign.
Citing “the needs of the United States economy,” Trump earlier this year exempted the computer hardware, networking gear, integrated circuits and industrial metals that AI requires from his global tariffs. It’s a move that critics said illustrates the flaws in the president’s policy of economic nationalism, which aims to eventually replace foreign suppliers with homegrown alternatives.
“The U.S. does not manufacture most of the advanced chips. It requires other inputs for infrastructure investment and it requires global data. Hence, the AI industry is dependent upon global trade,” said Daron Acemoglu, an economist and Nobel Prize laureate at the Massachusetts Institute of Technology. “I don’t think we have any chance of doing these things ourselves.”
As companies such as Google, Microsoft, Amazon and Meta pour hundreds of billions of dollars into AI infrastructure, global trade flows are being reshaped. AI accounted for one-third of global trade growth last year, according to McKinsey Global Institute. In the first two months of this year, the U.S. imported more than $43 billion worth of goods from Taiwan, which produces most of the world’s most advanced semiconductors, almost twice as much as during the same period in 2025.
Nearly one-quarter of the $3.4 trillion worth of goods that the U.S. imported last year was tied to the AI boom, according to an April study by the Federal Reserve Bank of Minneapolis. Thanks to the exemptions from tariffs, the growth in AI-related imports has far outpaced that of other goods.
Since 2023, the value of AI imports has risen by 73 percent compared with just a 3 percent gain for all other goods, said the study by Michael Waugh, a Fed economist, which used artificial intelligence to scrutinize government trade data.
The AI revolution entails the construction of warehouse-size data centers in states including Texas, Virginia, Indiana, Wisconsin and Louisiana. These sprawling “hyperscale” facilities rely on foreign data processing units, fiber optic cables and computer storage devices, as well as electrical cabling, networking gear, cooling equipment and specialty materials, Waugh said.
The U.S. has more than 4,200 such sites, according to an estimate by Data Center Map, a Danish company.
Economists differ over AI’s role in driving U.S. economic growth. As a definitional matter, imports are effectively subtracted from GDP calculations since they total the amount of goods and services produced in the U.S. But some AI investments are spent on domestic products, and the rising value of AI-related stocks has contributed to consumer spending, explaining why other economists take a broader view.
“This is an AI economy,” said Eric Winograd, director of developed market economic research for AllianceBernstein in New York.
Investor enthusiasm for anything associated with AI powered the S&P 500 index to a nearly 30 percent gain over the past year, he said. Many analysts consider the market to be overvalued. But with businesses increasingly replacing employees with technology, earnings may keep rising to support even higher share values, he said.
“If you assume that AI is sort of structurally going to keep profits elevated as a percent of GDP, then I think there’s no particular reason the stock market is overvalued,” he said.
The extent of the AI build out — and its reliance on foreign ingredients — was at the center of Thursday’s Commerce Department report. Half of the increase in final sales to domestic purchasers, which some economists watch as a broad measure of economic activity, came from AI-related computer hardware and software buys, according to Oliver Allen, senior U.S. economist with Pantheon Macroeconomics. Perhaps 80 to 90 percent of those products emerged from factories overseas.
That’s why the Trump administration’s reaction was so striking. The office of the U.S. Trade Representative posted a chart on X showing that capital goods accounted for 40 percent of all imports, up from 25 percent four years ago, and were at their highest share since 1992, which is described as progress toward reindustrialization.
Peter Navarro, a fiercely protectionist White House aide, chimed in via a social media video: “Look at what we are importing: high-value capital goods. That is the scaffolding of reindustrialization.”
The investment boom is possible only because Trump relaxed his tariff policy. In April 2025, after the president announced his global tariffs, both Navarro and Jamieson Greer, Trump’s chief trade negotiator, publicly ruled out exempting any products from the new import taxes.
Yet roughly half of U.S. imports were eventually spared from the new levies. Over the ensuing months, companies such as Apple obtained additional carve-outs for their imports. Without the surge in tariff-free goods associated with the AI boom, the U.S. trade deficit — which Trump wants to eliminate — would have been about $200 billion smaller last year, according to the Fed study.
Administration critics say the AI sector’s success illustrates the virtues of unconstrained trade. But the White House insists it deserves credit for the industry’s flourishing. The president’s signature tax legislation included provisions allowing businesses to immediately deduct the cost of new equipment and factories. And deregulation has further encouraged domestic manufacturing.
“A surge in business investment and new orders of the machinery and equipment needed for manufacturing and other industrial facilities are a direct result of the Trump administration’s pro-growth agenda,” said Kush Desai, a White House spokesman.
AI’s heavy reliance on foreign factories will prove temporary — if the president’s reshoring strategy succeeds — but MIT’s Acemoglu and most mainstream economists are skeptical that tariffs will produce a sustainable manufacturing renaissance.
Under the Biden and Trump administrations, the federal government has subsidized companies including Intel and Micron to expand domestic semiconductor production. That doesn’t mean the U.S. will ever replace the entire foreign production network it relies on today for AI.
“It is a little hard to imagine that we’ll have the same level of demand forever because we’re in the process of building the equivalent of roads, dams and bridges today. We’re not going to always continue to do that,” said Shubham Singhal, chair of the McKinsey Global Institute.
Ground zero for the AI boom may lie in the U.S., but the gargantuan investment flows involved are spilling well beyond U.S. borders. Thanks largely to AI, the Taiwanese economy, for example, grew at an annual rate of 12 percent in the first quarter.
Home to Taiwan Semiconductor Manufacturing Co. (TSMC), one of the world’s top chipmakers, Taiwan has emerged as perhaps the most important node in the global AI supply chain. Japan has roughly five times as many people as Taiwan. Yet Taiwan in February shipped more than twice as many goods to American customers, many of them tied to AI. That wasn’t true one year ago.
The companies producing the building blocks of the AI economy are also awash with cash. TSMC’s annual profit roughly doubled in three years to more than $55 billion. Nvidia of Santa Clara, California, which makes graphics processing units, did even better. The company saw an astonishing rise in profits to $216 billion over the 12 months ending in January, from $4.4 billion in 2023.
Just four companies — Alphabet, Amazon, Meta and Microsoft — expect to devote $700 billion this year to capital expenditures, according to their recent earnings calls. That’s more than the quartet, plus Nvidia, Oracle and TSMC, spent over the past three years. That means the U.S. import bill is likely to grow again in 2026.
Surging demand is pushing prices up for some inputs. Over the past year, producers of electronic components and accessories have raised prices by more than 19 percent, according to the Bureau of Labor Statistics.
Amazon has seen sharp increases in the price of items, including computer memory. (Amazon’s founder, Jeff Bezos, owns The Washington Post.)
“I think everybody knows that the cost of these components, particularly memory, has skyrocketed,” Andy Jassy, Amazon’s chief executive, told investors on Wednesday. “We’re just in a stage where there’s just not enough capacity for the amount of demand.”
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