Canada was thrust into a trade war again this weekend. After the US reportedly tried to change deal terms at the last minute, Canada backed out of a proposed trade agreement. The US then imposed a broad set of tariffs on $28 billion of goods on Saturday, with Canada announcing dollar-for-dollar retaliatory tariffs set to take effect on Sept. 8. It threw businesses into a new wave of uncertainty, and the feds have introduced a $7.5-billion package of new measures to support domestic industries.
Electronics and electrical equipment exports are set to be hit the hardest by tariffs among Canadian industries, according to The Globe and Mail, with Canada exporting roughly $4.4 billion USD ($6.1 billion CAD) worth of products last year. However, there’s a twin cost issue that may hurt the broader industry worse than tariffs. Tech giants pouring billions into AI compute infrastructure have contributed to a shortage in computer memory, driving up random-access memory (RAM) and other hardware prices.
Kevin Jia, the co-founder of Canadian PC maker Quoted Tech Computers, has a front-row seat to both electronics duties and skyrocketing hardware costs. BetaKit spoke to Jia about how Canada’s businesses and consumers should navigate juggling “chipflation” with potential new tariffs.
The following interview has been edited for clarity and length.
How might the collapse of this weekend’s trade talks, and the imposition of fresh tariffs and counter-tariffs, impact AI hardware buyers in Canada?
Any time tariffs come into place, it immediately puts everybody on edge. Everyone gets a little bit more nervous about how the supply chains will work.
But it really comes down to the country of origin for these AI hardware products. While many tech companies are headquartered in the US, like Nvidia and Intel, they don’t manufacture the actual silicon in the device. Sometimes they do some final assembly. Sometimes they don’t.
For example, US Customs and Border Protection treats Quoted Tech’s products as Vietnamese in origin, even though the vast majority of the final product is done in Canada. They will say the identifying factor of a desktop computer is the central processing unit, which is of Vietnamese origin.
Now, why do they do that? I have a suspicion they’re probably trying to play to the tariff code, and that they see Vietnam as kind of a tariff-free zone. That’s purely me speculating.
So how are tariffs really impacting the computing industry?
The tariff code is exceptionally complicated and long, and there are a lot of carve-outs for separate industries. Anybody who has tried to do any major brokerage between the two countries since Donald Trump first imposed new tariffs knows how complicated this is. And getting a definitive answer on anything is like finding a needle in a haystack.
When I saw the 50-percent tariffs and people said the price of computers is going up, I said, “Whoa, in what circumstance?” I also saw that they’re going to tariff Canadian video game consoles. To my knowledge, there are no consoles that are manufactured wholly in Canada. If there is a CPU—and every gaming console has a CPU and a graphics card—those components would be designated as most likely Taiwanese or Vietnamese in origin. When I read that, I was very confused.
The US and Canada base it on a country of origin; who made the original “product” gives it its defining characteristic feature. It doesn’t matter where the final assembly happens; they’re going to find one component that is the designating factor of that product and say, okay, well it happens here.
The new tariffs come alongside computer hardware costs already rising, potentially creating a double impact for consumers. How is the RAM price hike affecting Canadian companies and buyers—both at the hardware level, and then downstream costs of AI in general?
If you’re one of the hyperscalers, the price increases are, truthfully, relatively muted. They are investing billions upon billions of dollars into data center infrastructure. So, for them, a 15- or 20-percent price hike won’t hurt them. They’ve got big contracts that would have been signed way before the price hike.
For the rest of us who are just consuming off the shelf, that’s going to affect everything that you purchase. For a regular Canadian, that means your smartphones, your computers, your tablets—all that’s going to go up. In business, if you’re buying laptops, workstations, servers, all of that is going to be felt at the door. If they’re more RAM- and GPU-heavy, they’re going to feel it worse.
What kind of broad impact does chipflation have on Canada’s startup and tech sector?
The Canadian startup sector is a lot tougher than what they have in the United States and Silicon Valley. There’s just a lot less attention; it’s a lot harder to get funding, and there’s a lot more scrutiny over the projects.
For a lot of these startups that are in AI, that are in deep technology, that are building software, that need access to high-density compute, it’s going to increase their startup costs. Startups are no different than any other business looking to procure hardware. They have a limited budget, and so it’s going to hurt every business trying to get into this space.
How should companies prepare for chipflation and tariff uncertainty? How can they avoid overspending?
The sad reality is that there isn’t a whole lot, truthfully. When it comes down to computer chips, there isn’t a massive market of free-flowing products somewhere else in the world. It’s obviously why Nvidia is the most valuable company in the world.
When customers are shocked by the prices, I say “look, just don’t try to time the market. Buy a computer if you need a computer. You could be waiting until the end of 2027, most likely, before we see a resumption of normality.”
Feature image courtesy Christian Wiediger via Unsplash.