CIOs brace for tariff impacts on tech industry and their businesses

US President Donald Trump’s escalating tariff war is expected to upend the IT investment plans of global CIOs and greatly impact all sectors of the IT industry in the coming months, slowing adoption of AI and damaging long-established supply chains, perhaps for good.

Based on the current — but fluid — tariff schedule, IDC halved its forecast for projected IT spending growth from 10% to 5% in 2025. The research firm, which now pegs the risk of global recession at 40%, said that growth could be even lower, with China issuing a retaliatory tariff against the US in excess of 30% and European leaders meeting to agree on their responses to the United States. President Trump today threatened an additional 50% tariff on China beginning Wednesday if China did not rescind its retaliatory tariffs.  

“The wave of new tariffs introduced by the US administration will drive up technology prices, disrupt supply chains, and weaken global IT spending in 2025. Not only will these tariffs have a direct inflationary effect on technology prices in the US, but growing concerns about a broader economic slowdown will lead to weaker investment by businesses and consumers around the world, even prior to any slowdowns appearing in earnings or economic data,” IDC wrote in its report. “This impact will unfold quickly in 2025, despite the strong countervailing force of growing demand for AI and related technologies.”  

The research firm also noted that the inflationary impact on technology prices will be widespread.

“While this impact will be most immediate in devices, then other compute, storage, and network hardware as well datacenter construction, even sectors such as software and services will be affected if tariffs are longer lived,” IDC noted. “There’s also an indirect negative impact of tariffs on software and services, where the provider delivering the software and/or services will incur increased costs for the infrastructure to develop and deliver the product, meaning that many software and services vendors will need to include increased costs in their own pricing assumptions.”

CIOs gird for changes to their IT agendas

CIOs also believe the recently announced tariffs will significantly impact their capacity to deliver on initiatives, as well as their staffing strategies going forward.

“There is no doubt that we will see a knock-on effect of tariffs in every business globally and in IT the impact will be slowing or stopping projects, slow up on any hiring, and many of us will tap into the consultant and staff augmentation workforce, releasing them to minimize impact on our full-time staff,” said one top CIO who declined to be named. “I suspect that the gig economy and consultant-based organizations will be impacted, possibly for a significant time.”

Isolationism and the Trump administration’s approach to immigration issues are also having an effect on CIOs’ staffing outlooks, the CIO added.

“As a multiplier, there is also a growing fear amongst many staff that depend on visas to be able to work in the US finding out these may not be renewed, or possibly rescinded,” the CIO pointed out. “This too will change the staffing dynamics and add to the potential impacts.”

One consultant noted the challenging position CIOs in the US and across the globe now find themselves in when it comes to delivering on their IT agendas.

“The projected halving of US IT spending by 2025-2026 due to tariffs presents a significant strategic challenge for chief information officers,” said a former CIO who declined to be named. “While fiscal prudence necessitates evaluating and potentially reducing expenditures in areas such as cloud infrastructure and emerging technologies like artificial intelligence, CIOs must concurrently navigate the imperative of leveraging AI for sustained competitive advantage and market differentiation.”

The former CIO turned consultant advises IT leaders not to cut innovation initiatives despite the cost-challenging environment.

“A purely reactive, short-term cost-cutting approach that neglects strategic AI investments risks substantial market share erosion, potentially exceeding the negative impact of the tariffs themselves,” the consultant said.

CIOs in sectors expected to be hit hardest by tariffs, such as the automotive industry, find themselves in a particularly challenging position.

Shamim Mohammed, EVP and chief information and technology officer at Carmax, said he continues to monitor and assess the potential impact of the announced tariffs — but expects negative impacts in all his business units.

“Tariffs on finished imported vehicles would likely cause new car prices to rise, increasing the gap in price between new and used vehicles,” Mohammed said. “This could lead to a shift in demand between new and used [cars], which over time could cause used-car prices to rise as well. We will continue to monitor the impact on parts, which would be industrywide.”