Analyst firm foresees a ‘much weaker outlook for short-term investment in new technology projects’
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IDC: Tariffs will raise tech prices and cause ‘significant disruption’ to supply chains
The US government’s tariffs will directly increase technology prices and cause significant supply chain disruptions, particularly for devices, compute, storage and network hardware, according to analyst firm IDC.
They will also lead to a global slowdown in IT spending, the firm predicts, revising its March forecast of 10% growth to an April figure closer to 5% to reflect Trump’s tariffs imposed on 2nd April.
The tariffs and the prospect of a global trade war is leading to further economic instability. China, which has already imposed a retaliatory tariff of 34% on all US imports, vowed today to hit back against any further punitive action by the Trump administration.
This uncertainty will immediately hit business and consumer confidence, leading to reduced investment, according to IDC, which cites “some economists” as believing that the likelihood of a global recession could be as high as 40%.
“New tariffs will have an inflationary impact on technology prices in the US, as well as causing significant disruption to supply chains,” an IDC report says.
Hardware prices will be affected almost immediately, given “lean inventories and rapid manufacturing cycles” and the fact that manufacturers have little opportunity to adjust their supply chains in the short term, but software and services will be impacted too if the tariffs continue for a longer period, IDC notes: “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.”
Nevertheless, in comparison to some other sectors, the central importance of technology means it will remain resilient overall, with the biggest hits coming to on-premises purchases. Service providers, meanwhile, will “try to maintain their aggressive investment in deployments of AI infrastructure, and they have the ability to optimise asset use to much greater extent than even the largest of their enterprise customers”. Thus the tariffs are likely to further favour the as-a-service model.
However, spending on IT services is also threatened by a broader economic slowdown, and in a worst-case scenario, tit-for-tat retaliations could lead to a situation last seen in the aftermath of the 2008-09 financial crash, the analyst firm says.
“Combined with other economic headwinds, including government spending cuts in the US, this adds up to a much weaker outlook for short-term investment in new technology projects.”
