The nascent AI hardware is facing the most intense tariff war.

Text | Wang Fangyu

Editor | Su Jianxun

"We've stopped shipping to the US market."

Zhang Qian is the founder of an AI plush toy company in Shenzhen. Since April, he has watched helplessly as US tariffs have continued to increase. The attitudes of several partners have changed from "the impact is not significant" at the beginning to "increasingly tense".

Until April 10th, the US government announced that the "reciprocal tariff" rate on Chinese goods exported to the US would be raised to 125%. "Once the tariff rate exceeds 100%, the products will completely lose their competitiveness in the US market," Zhang Qian told Intelligence Emergence. He and his team have been working overtime in the office until midnight for half a month. After several rounds of calculations, they finally had to make the decision to suspend shipments.

With such high tariffs, the sales of domestic exported goods in the US market will surely be affected. AI hardware, as an emerging technology product, has its own special features - the US is one of the largest consumer electronics markets in the world and is also the main overseas market for many AI hardware products.

Currently, for domestic AI hardware startup projects, the first stop to verify market acceptance is usually to go global to North America (mainly the US). US consumers have a high acceptance of innovative products and stronger payment ability and willingness. A common practice is to conduct crowdfunding on the Kickstarter website to attract the first batch of seed users.

"We have a simple empirical summary within the company. For every 50% increase in tariffs, the net profit margin of AI hardware companies drops by 10%. Currently, among AI hardware industries, the net profit margin of well - performing companies can reach 15%, while that of ordinary companies is only 5% - 10%. If the terminal selling price doesn't increase, a tariff of over 100% will make all AI hardware companies' business in the US unprofitable," said Li Xiao, a senior hardware investor, to Intelligence Emergence.

Smart glasses (including AR and AI glasses) are a relatively lucky category among AI hardware. Trump announced a tariff exemption list on April 12th, covering smartphones, laptops, memory chips, hard drives, etc. Several smart glasses industry insiders told Intelligence Emergence that smart glasses are currently on the tariff exemption list.

However, the exemption may only be temporary. The US Commerce Secretary revealed on April 13th that smartphones, computers, and some other electronic products will be subject to separate tariffs, and chip products may also be taxed within about a month.

Smart glasses are currently on the US tariff exemption list. Source: Visual China

The institution where Li Xiao works recently held a general meeting to conduct an overall review of the tariff impact on the invested projects. The conclusion is: "Tariffs have a great impact on AI hardware projects exported to the US, especially mid - to - late - stage projects. It is necessary to recalculate the financial model and project valuation."

Witnessing the US tariff policy change several times in half a month, the investment institution has stopped promoting AI hardware projects going global to the US and is waiting for the progress of the China - US tariff negotiations and the finalization of the tariff policy. The partners of the institution unanimously believe that there will be a new solution to the China - US trade relationship, but it will never return to the past.

AI Hardware Relies More on the US Market

Tariffs have different degrees of impact on different categories of Chinese goods. AI hardware is one of the product categories that are more severely impacted.

"Generally speaking, the more innovative the category, the more it relies on the US market and the greater the impact of US tariffs. Because the US market has the strongest consumption ability and the highest acceptance of innovative products. Most AI hardware products are new - style products. To conduct market verification, US users are often the first - choice target group," explained Gao Fei, an AI hardware investor, to Intelligence Emergence.

The e - commerce penetration rate in the US market is also higher, which makes it easier for AI hardware products to enter and open up the market. Gao Fei introduced that the total e - commerce scale of more than forty European countries is not as large as that of the US alone (in 2024, the total e - commerce revenue in Europe reached about $659.1 billion, while the overall e - commerce scale in the US reached $1036.4 billion).

Kickstarter is headquartered in New York, the US, and is the world's largest crowdfunding platform. Source: Visual China

Take the star AI hardware products unveiled at the CES (Consumer Electronics Show) in the US in January this year as an example. Many popular AI hardware manufacturers, such as those of AI glasses, AI companion toys, and AI bird feeders, chose the Kickstarter crowdfunding website, which mainly targets European and American users, as the first stop for market verification.

Some smart hardware products, such as pool cleaning robots and lawn mowing robots, are designed for house users in Europe, America, Australia, etc. They rely more on the European and American markets and are more negatively impacted. Public data shows that North America (mainly the US) accounts for 35% and 36% of the global sales of lawn mowing robots and pool robots respectively.

For relatively mature smart hardware categories, such as AR glasses, a considerable part of the market is also in the US. A leading AR glasses manufacturer told Intelligence Emergence that the US market currently accounts for 30% - 40% of its global sales. "If the tariffs are really raised to an extremely high level, we expect that the US business will face certain pressure in the short term."

Of course, there are also a small number of AI hardware products that are currently only sold in the Chinese market and are thus immune to tariff impacts, such as children's AI hearing machines and AI plush toys with domestic IPs.

Do AI hardware manufacturers have the ability to raise prices in the face of tariffs?

An optimistic expectation is that for 3C digital and smart hardware, there are not many industrial chains in the world that can replace China's. Therefore, manufacturers have the ability to raise prices appropriately. For example, Anker Innovations has taken the lead in raising the prices of its products on Amazon in the US by one - fifth.

However, AI hardware manufacturers have not taken any action to raise prices yet. Li Xiao told Intelligence Emergence that for various reasons, none of the several AI hardware manufacturers they invested in have raised prices so far. "Most early - stage startups have low brand recognition, and domestic and foreign competitors are eyeing them covetously. They are not daring to raise prices rashly for the time being. They are all waiting for the results of the trade negotiations."

"Of course, if the US tariffs are fixed at 125%, they will have to raise prices sooner or later. However, raising prices also comes at a cost," Li Xiao explained. Most AI hardware products are not necessities but belong to consumption upgrades. Consumers can choose whether to buy them. Once the prices are raised, it is easy to affect the terminal sales volume.

For example, if the price of a mobile phone charger increases from $5 to $10, users may not feel it too much. But if the price of a $2000 lawn mowing robot is raised to $2800, consumers will feel it very clearly.

After evaluation, the conclusion drawn by the institution where Li Xiao works is that mid - to - late - stage AI hardware projects are most severely impacted by tariffs, and their future financial models will be greatly discounted. Early - stage hardware projects are also affected to a certain extent, but they can quickly adjust the market, and tariffs do not constitute a decisive factor.

It is worth mentioning that there has always been a so - called "gray clearance" method for domestic goods exported to the US. The so - called gray clearance means that exporters hand over the goods to specialized clearance companies, which lower the declared value of the goods to reduce tariffs. This is an "unwritten rule" in the industry.

However, the "gray clearance" method is not compliant, and the possibility of being inspected is also increasing. Some media reported that the inspection frequency of US customs has increased significantly. In the past, only 1 out of 100 containers was inspected, but now 30 out of 100 are inspected. Whether the "gray clearance" method can continue to exist in the future and how large a volume it can accommodate still need to be verified.

"Small - scale and low - profile AI hardware can enter the US through the gray clearance method to avoid high tariffs. For example, for companies in the crowdfunding stage, the value of the goods is only $1 - 2 million. But if AI hardware companies want to ship on a large scale, they must be compliant," Gao Fei said.

He believes that under the high US tariffs, the "gray clearance" method will continue to exist, and small - company AI hardware can still enter the US through this method in the future. "The risk of gray clearance lies not with small companies but with intermediary agencies. The higher the tariffs, the greater the profit of this kind of business, and there will always be some people doing this kind of business."

Put Eggs in Multiple Baskets

Most AI hardware manufacturers and investors are in a state of stalemate and waiting.

Intelligence Emergence learned that the overseas inventory of general brands can last for 2 - 3 months. Many manufacturers have stopped continuing to ship and are waiting for the next progress of the tariff negotiations and policies.

The founder of an AI glasses brand predicted that after negotiations, the US tariffs on Chinese goods are expected to stabilize between 30% and 40% in the next step, and believes that this tariff level will not have a great impact on the competitiveness of Chinese goods.

"A tariff of over 100% is too exaggerated and should not be a long - term situation," said Jeffery, the person - in - charge of an AI companion product manufacturer whose products were recently launched on the Kickstarter crowdfunding website. They are also waiting for the latest progress of the China - US tariff negotiations.

However, Jeffery also admitted that if the US tariffs on Chinese products remain above 100% in the future, the company must accept the reality. He has held a meeting with his partners to discuss adjusting the global market plan and expects to reduce the sales proportion of the US market from 70% to below 50%.

Even though the tariffs in the US market are high, it will still be part of the global layout of AI hardware companies, but the proportion will decrease.

"In the future, when Chinese AI hardware manufacturers choose online crowdfunding, the first stop should still be Kickstarter, and they still need to conduct market verification in the US market. This is determined by the maker culture in the US. Even if the tariffs are increased to 100%, this part of consumers can still accept it," Li Xiao said.

What Chinese manufacturers need to do is to put eggs in multiple baskets.

"From a long - term perspective, I actually think this is a good time. Tariffs make people clearly realize that they cannot rely entirely on the US market and should consider going global on a global scale," Gao Fei said.

According to Gao Fei, currently, the destinations for Chinese smart hardware companies going global are divided into several levels. The first level is North America and Europe, the second level is Japan, South Korea, Singapore, and the Middle East, the third level is Southeast Asia and Latin America, and the last is India and countries along the Belt and Road. "Each market has its own needs. It is necessary to find the optimal cost - effective solution according to market demand and purchasing power."

Some mature brands have already taken action. The person - in - charge of the above - mentioned AR glasses manufacturer told Intelligence Emergence that the company had already planned a diversified market strategy in advance and has covered multiple regional markets such as Europe, East Asia, Southeast Asia, and the Middle East.

"Currently, the AR glasses category is on the US tariff exemption list for electronic products, and the sales volume has not been affected. If the tariffs are really raised to an extremely high level, we are confident that we can ensure the stability of our global business," the person - in - charge said.

At the just - concluded 137th Canton Fair, "Made in China" is continuously attracting global customers. Source: Visual China

AI hardware and going global have been hot topics for many investment institutions in the past, and AI hardware companies going global to the US are the hottest of the hot topics. Will the US tariff impact affect the subsequent financing and development of AI hardware companies?

The current situation is not optimistic. Gao Fei told Intelligence Emergence that he learned that several institutions in the industry are preparing to suspend investments in relevant projects.

But he believes that this is just an emotional reaction to the tariff impact at present. "It is normal for the attitudes of investment institutions to change suddenly within a few months." In the long run, he believes that this is actually a good time to select high - potential AI hardware projects. Project valuations will be affected by tariffs, and investment institutions will have more options and initiative.

"Made in China has the resilience of a complete industrial chain. For some precision digital products such as AI glasses, only China can produce them in the world. China's AI technology is also at the international top level. This determines the global competitiveness of China's AI hardware industry. The pace of China's AI hardware going global will not stop because of US tariffs," Gao Fei said.

(All names in the article are aliases at the request of the interviewees)