The Pulse: Trade, Tariffs,AI, Data Centers, and Rising Electricity Costs

Data centers form the backbone of our digital world, but their rapidly growing energy demands could reshape electricity markets worldwide. By 2030, these facilities are projected to consume a staggering 945 terawatt hours annually, potentially driving up costs for everyone as utility companies struggle to meet demand. While some regions are already implementing regulatory measures to manage this consumption, the competition for power resources intensifies as tech giants secure long-term energy contracts.

Trump's tariff wars have reached unprecedented levels, with Chinese goods now facing a 145% tax at American borders. The consequences are immediate and far-reaching—Apple's iPhone could see its price nearly triple to $3,000, forcing the company to charter emergency cargo flights from India to mitigate impacts. As Janet Yellen aptly described it, these tariffs represent "the worst self-inflicted wound I've ever seen an administration impose on a well-functioning economy." The global supply chain disruption extends beyond consumer electronics to automobiles, agriculture, and countless other industries caught in the crossfire.

The dream of "reshoring" manufacturing to America faces a fundamental reality check: modern production relies on intricate networks spanning dozens of countries, developed over decades since World War II. These complex supply chains cannot be quickly reconstructed within national borders, regardless of tariff pressure. The Port of Los Angeles already anticipates a 10% cargo decline in the second half of 2024 as early shipments to beat tariffs give way to reduced consumer spending. Meanwhile, China's retaliatory measures, including halting shipments of crucial rare earth metals, demonstrate how trade wars create no winners—only businesses, workers, and consumers navigating an increasingly uncertain economic landscape.

Subscribe to Chain Reaction for weekly insights into the forces reshaping global supply chains and their impact on businesses and consumers worldwide. Your understanding of these interconnected systems has never been more crucial than in today's vola

You can follow Chain Reaction on LinkedIn, Twitter and Facebook

Chapters

• 0:00 Welcome to Chain Reaction Podcast
• 16:57 ] Industry News and Weekly Roundup
• 18:04 Data Centers and Electricity Demand
• 3:21:09 Apple's iPhone Supply Chain Challenges
• 6:50:02 Global Fallout from Trump's Tariffs
• 9:55:03 The Unsustainable Reality of Tariff Wars
• 11:51:01 Port Volumes and Plastic Supply Chain Issues
• 14:32:04 Economic Updates and Global Impacts

Transcript

Speaker 1: 0:00

Hello, tony Hines. Here You're listening to the Chain Reaction Podcast all about supply chain advantage. This is the Pulse all things impacting global supply chains this week. Stick around, stay tuned, stay informed. Thanks for dropping by.

Speaker 1: 0:17

Data centers are the backbone of modern digital infrastructure. They power everything from AI models to cloud storage. However, their energy consumption is skyrocketing. Ai-driven computing requires colossal processing power, increasing electricity demand. Cooling systems for servers consume nearly half of a data center's total energy. Tech hubs like the US, europe and China account for 85% of global data center electricity consumption. With AI adoption accelerating the energy footprint of data centers is expected to reach 945 terawatt hours by 2030. So how could this push electricity prices higher?

Speaker 1: 1:00

The rapid expansion of data centers could lead to higher electricity costs due to several factors. Firstly, increased demand on the grid. Utility companies may struggle to meet demand, leading to higher infrastructure costs. Some regions like Texas and Ireland are already implementing regulatory measures to manage data center energy consumption. Competition for power is the next thing. Tech giants are securing long-term energy contracts, potentially limiting supplies for other industries and consumers. A survey of 13 major US power providers found that nearly half received requests for power exceeding their current peak demand.

Speaker 1: 1:40

Thirdly, energy source limitations. While renewables are expanding, some regions still rely on coal and natural gas, which could drive up cost. Trump's tariffs on China, which have hit a high at the moment of 125%, may restrict access to raw materials needed for renewables. Despite the challenges, ai and renewable energy investments could mitigate rising electricity costs. Ai-powered energy optimization can improve efficiency and reduce waste in data centers. Tech companies like Google, microsoft and Amazon are investing in nuclear and renewable energy to power their data centers. Battery storage and hydrogen energy solutions are emerging as alternatives to stabilise power. So, in conclusion, the growing electricity demand from data centres is likely to push prices higher, but AI-driven efficiency and renewable energy investments could help mitigate the impact as governments and tech companies navigate this challenge. The future of electricity pricing will depend on how quickly sustainable solutions can be implemented, and the one thing, of course, that governments might decide to do is tax the tech companies at higher rates to claw back their claim on the resources like electricity, and that might help keep the bills at a more affordable rate for everybody else and ensure that supply can meet demand. What do you think? Will AI help solve the energy crisis, or will data centers continue to drive costs upwards?

Speaker 1: 3:21

Apple sources components and parts for its iPhone from about 43 countries throughout the world. Of course, the tariff wars are causing real problems for the company and the stock price has fallen. 80% of the phones are manufactured or assembled in China and 20% in Vietnam and India. And new plants were established in India and Vietnam under Trump's first presidency, when he started his trade war with China. The trade war goes on, of course, and this week President Trump's tariffs on China have gone to an all-time high. They now stand at 145%. That would make an iPhone in the United States, according to expert analysts who've assessed it. They say the price of an iPhone in the US could rise close to $3,000 from its current $1,099. That's the iPhone 16. So it could make it not just twice the price, which some analysts at first said when the tariffs were first announced at a lower rate, but now they say that it could make it three times the price. So I think American consumers will appreciate Trump's tariffs, won't they?

Speaker 1: 4:38

This week Apple took action to try and avoid or mitigate the tariffs. They've chartered cargo flights to import 600 tons of iPhones, or as many as 1.5 million units, to the United States from India, after stepping up production in that country. Chinese imports are much higher. There's about 26% of imports come from India, but it's much higher from China, of course, and although Trump has paused the tariffs, he hasn't paused them on China. There's a 90-day pause, which makes the world even more uncertain. But actually, stock markets had some respite from the large falls in the past couple of weeks as a result of this pause. But the question is how long can the tariff madness exist and how long will the American people put up with this chaotic government? The money markets have spoken and they don't usually get things too wrong, so how long will they tolerate the president's tariff madness? Going back to the Apple situation, there have been about six of these jets with 100 tons of phones since March. That's one a week, just as these new tariffs took hold.

Speaker 1: 5:53

So is this making America great again? Well, it's hard to see, isn't it? Does he really think that companies like Apple can manufacture in the United States and get everything they need and keep their costs efficient and sell the goods at reasonable prices? It's doubtful. Now we have a special this week which is all about the interconnectedness of supply chains and we tell the story of three products and we take a look at agriculture and the impact of tariffs and you can judge for yourself whether you think these policies, which are not joined up or thought through by the US administration, will actually achieve the goals that they say they will.

Speaker 1: 6:50

The damage and the fallout from tariffs, of course, across the world is likely to see countries coalesce to different partnerships and move away from the United States towards other countries they feel they can do business with on a more level playing field. The 10% tariffs still remain, of course, as a flaw for everyone, and excessive tariffs on China at 145%, which will probably do more damage to the United States than it will to China. The United Kingdom this week is looking to smooth the relationships with the European Union. They realise they've got the floor-level tariff of 10%, which they thought was a great deal when the EU had 20%, but it doesn't look so great now and the largest trading partner for the United Kingdom is the European Union. So it's time to talk, time to reset, and Trump's made it very clear that Europe is on its own when it comes to defending itself and looking after the interests of Europe. Now some regard that as a reasonable thing to say, because countries should be looking after themselves, but they also need cooperation and partnerships with people who are reliable, and with the current administration that doesn't look such a reliable relationship and so untold damage will be done, I think, in trade partnerships and other levels of cooperation across the world.

Speaker 1: 8:24

One of the impacts of the tariff wars, of course, is the increasing demand for transportation from those parts of the world where tariffs have hit hard to the rest of the world, and the speeds that those ships are travelling. Well, they're doing about 20 knots or more. They're racing at breakneck speed across the oceans to get the goods into the United States to beat the tariffs, those 25% tariffs on automobiles, of course, that have stayed in place since they've been introduced. There's no pause on those. They're going to have a very bad impact on the automobile industry across the world and they're going to limit consumer choice. Of course, in the United States they're going to be left with limited choices. They're not going to be able to buy those cars at the prices they'd hoped to buy them, unless they've already got their money down on those cars. So the luxury cars, for example from the United Kingdom, like Bentley, rolls-royce and, of course, land Rover, jaguar, they're not going to be able to get hold of those vehicles without paying a lot extra. We know, of course, from experience once prices go up, they hardly ever come back down again, tariffs or not. They'll just be taken in extra profits by the sellers of those goods. They might come down a bit, but they won't go back to the prices they were before the tariffs were applied. So it's another consequence of this policy of stupidity. I mean, that's all you can call it really. The former US Treasury Secretary, janet Yellen, said this week about tariffs that they're the worst self-inflicted wound I've ever seen an administration impose on a well-functioning economy. Tariffs, if ever, seldom achieve what the nation imposing the tariffs hopes to gain.

Speaker 1: 10:19

Trump has claimed he wants to make America rich by bringing manufacturing home. That is, restoring manufacturing. The problem is that global companies have production hubs in many countries. Supply chains for these products require sourcing and production units across the world. These strategies have developed over decades since the Second World War. Raw materials and components for many products have complex supply chains with thousands of suppliers often linked in multiple tiers. The automobile industry is a case in point, aerospace and electronics too. So is it possible to unpick these complex chains and reshore within the US? Well, no, is the definitive answer. Even if it were, how long would it take to realign operations? Years is the answer, long after Trump's gone.

Speaker 1: 11:11

Tariffs at 145% on China with reciprocal tariffs on 125% from China will harm both. There are no winners here, only losers. The biggest losers will be businesses caught in the crossfire of extortionate tariffs. It's unsustainable and that means higher prices for businesses. It means disruption in supply chains, it means uncertainty and, worst of all, it means higher prices for consumers in the United States and everywhere else. The Port of Los Angeles processed 778,406 20ft equivalent units in March. That's 4.72% on last year. So the volumes at Los Angeles have gone up in the first quarter and they've had growth 18 out of the past 20 months, director Jean Soroka said at a media briefing. The start of the second quarter looks encouraging as importers begin to plan for spring and summer fashion as well as back to school. However, with tariff and counter tariffs dominating the news, I expect we'll see cargo decline in the second half of the year, at least 10% compared to 2024. And that's because many importers have already brought their goods in early to avoid the tariffs and as prices begin to rise, consumers will think twice about many purchases.

Speaker 1: 13:03

The Journal of Communications, earth and Environment analysed the global plastic supply chain in 2022, and it looked at the types of plastic and their journey from feedstocks through to products and what happens when they reach the end of their useful life. Global production of plastic has grown from 2 million tonnes in 1950 to 400 million tonnes in 2022. But only a tenth less than a tenth of that 400 million tons of plastic that's produced around the world is manufactured from recycled materials. Researchers in China tracked the global plastic supply chain and said that just 9% of the plastic produced ends up being recycled and only half of it is sorted and sent for recycling to make new products. So when everybody puts forward the argument that it's okay because we can recycle all the plastic we make, we actually can't and we don't, and so it just adds to the waste mountain of plastic that enters the rivers, the oceans and landfill. Plastic is a good material, of course, but we have to find a better way to deal with plastic at the end of its useful life.

Speaker 1: 14:32

Well, this week there was some good economic news in the United Kingdom, and that was that the growth measure GDP gross domestic product was up to half a percent and that was for February, so it's a bit out of date it's a couple of months back, but that's the way statistics were. It was better than expected. Many predict that taxes will have to rise in the autumn as a result of the changes to the world economic situation, mainly President Trump's tariffs. It's likely that British Steel will be re-nationalised, and that's to protect UK interests. The Chinese company Jingbo, which runs British Steel presently, has said they wanted to close the two remaining blast furnaces, but the government in the United Kingdom are very unhappy about that because it will mean insufficient capacity to produce high quality steel Elsewhere. China have raised their tariffs to compete with the United States, imposed tariffs of 145%, they're at 125% and it's remaining at that, and they'll say they'll do what it takes. And China, of course, are now negotiating with other countries in Southeast Asia to form their own free trade area. So this is likely to backfire on Trump's plans for tariffs and how he'll isolate China.

Speaker 1: 16:06

It's the United States that will probably be isolated in this process. It never goes well, of course, when everybody has to agree with the leader. I've seen it happen in companies where the board were afraid to say things to the leader because they didn't want to upset him or her, and similarly for countries usually dictatorships, of course when leaders remain totally unopposed and only want to hear what they want to hear, and that's the danger that the United States faces currently. It usually doesn't end well, of course, but leaders are often replaced in those circumstances and I've seen it happen to the best of companies. It always tells you that something's not quite right in the global economy. When gold prices surge and they're at a record high $3,200 per ounce, jp Morgan has set aside a billion-dollar buffer for potential defaults because of the worsening trade situation. Poor economic forecasts following Donald Trump's trade tariffs. Jamie Dimon, ceo, said the world is facing turbulence and he's concerned about the US economy.

Speaker 1: 17:28

The International Maritime Organization has approved the UN plan to charge ships at least $100 per tonne of carbon dioxide emitted above a decarbonisation target. This tax will come into force by 2028. The United States has said it will retaliate against this idea. The online fast fashion retailer Shein has been given approval from the Financial Conduct Authority for its planned stock market listing in London. This is despite widespread criticism of this move.

Speaker 1: 18:01

China has halted shipments of rare earth metals, which are placed on an export control since last week. This risks shortages overseas as Chinese exporters begin a long wait for government licences. The shipments ceased on the 4th of April and these rare earths, of course, are in demand for defence, energy and automotive industries. It's part of the retaliation against Donald Trump's increasing tariffs on Chinese goods and, unfortunately for the United States, china produces 90% of the world's rare earth metals, and the export restriction just shows how Beijing are able to weaponize this part of the protest against the United States. Overseas buyers, of course, will no doubt move away from China, but it will take some time.

Speaker 1: 18:51

It's difficult when somebody's supplying 90%, isn't it, to find a new supplier, and as the markets closed this week, oil was down to $63.77 a barrel. That's the lowest for some time. Don't forget to subscribe to Chain Reaction and you'll be first to know when new episodes are out. You can always text us and let us know what you think. Well, that's it for this week. I hope you've enjoyed the episode and I'll see you again in the Chain Reaction Podcast next time. In the meantime, take care, I'm Tony Hines. I'm signing off. Bye for now. You've been listening to the chain reaction podcast, written, presented and produced by tony hines.