Compositional Constraints: The U.S. Proposal on AI Chips and Servers

The United States has proposed limiting the composition of artificial intelligence (AI) chips and servers, a move that could significantly reshape global supply chains in this sector. This initiative, still under negotiation, aims to restrict the use of components manufactured outside North America in the production of these devices. The plan seeks to prevent the circulation of Chinese or Asian parts through neighboring countries like Mexico, thereby avoiding US tariffs. This measure is part of broader discussions to update regional trade agreements, such as the United States-Mexico-Canada Agreement (USMCA), which aims to ensure more domestic supply chains. For the U.S., this proposal serves not only to avoid tariff burdens but also to bolster domestic manufacturing and reduce reliance on foreign markets. However, it will increase costs and complexity for manufacturers, particularly those that have shifted some production to Mexico in order to circumvent trade tensions with China. As market expectations rise regarding these policy changes, investors should closely follow upcoming U.S.-Mexico trade negotiations and their potential implications.