Tariffs Threaten to Halt Electronics Demand Surge

The imposition of new tariffs on China, Mexico and Canada by the United States is threatening to bring the recent rise in electronics demand to a screeching halt as buyers discontinue the trend of front-loading orders.

The Commodity IQ Demand Index has been on a two-month growth streak, with the score rising by 5% in January and then by 9% in February on a sequential basis. The increases boosted the index score to 85 in February, marking the highest reading in seven months but still below the prepandemic baseline.

Sourcing Strategies Shift in Response to Tariffs

The demand increase in February was broad-based, with 89% of commodities tracked by Supplyframe experiencing sequential growth. The rise was also robust, as slightly more than half of all commodities increased by double-digit percentages. Fiber optics, consumer circuits, RF/microwave devices, memory and programmable logic led the growth parade.

The increase in early 2025 has been driven by a number of factors, including the ongoing AI boom and rising EV sales in China fueled by government incentives. However, tariff-related purchasing is a significant factor propelling the recent growth.

Buyers have been front-loading demand in advance of the implementation of tariffs in order to avoid the expected cost increases. This unseasonal demand surge is widespread among electronic components, evident in the supply chains for bellwether parts, including capacitors and analog ICs. Logistics trends and raw metals pricing are also being affected.

Meanwhile, commodity management organizations are increasingly engaging in reshoring programs to reduce dependence on Chinese supplies. This phenomenon is also boosting demand, as implementing such programs inevitably leads to redundant ordering.

Component Inventories Took a Hit in February 2025

The impact of the demand surge has been amplified by the depletion of stockpiles in the supply chain. The Commodity IQ Inventory Index in February fell by 7% sequentially to to less than half of the 2020 baseline. February marked the lowest score in the history of the index, stretching back to January 2019. With inventories low and increased global tariff costs, the rise in sales has translated directly into increased demand for suppliers.

However, the tariff-driven demand surge may be ending, with the on-again, off-again nature of U.S. import tariffs and the retaliatory moves by those nations impacted further complicating electronic component supply chain dynamics.

As this writing, 20% U.S. duties are in effect for Chinese imports and as much as 60% for semiconductors, 25% levies on Canadian and Mexican goods have been paused until the first week of April, and the European Union has responded to U.S. metals tariffs by targeting $28 billion worth of U.S. goods by mid-April.

Rising Prices for Consumers on the Horizon?

As global tariffs solidify, component buyers will have much less incentive to accelerate purchases, although fear of further escalations in the trade war could still spur some purchasing activity. Moreover, the tariff actions are set to increase pricing and reduce sales growth for electronic products, further eroding purchasing momentum.

The tariffs are already taking a toll on demand for end products, with one market researcher lowering its forecast for PC shipments in 2025 and beyond due to expected tariff-driven price increases.“Tariffs will spur inflation, and not just on groceries,” warned Gary Shapiro, CEO and vice chair of the Consumer Technology Association (CTA).

CTA research points to potential 45% increases in laptop prices and up to 26% for smartphones.

Electronic component procurement and commodity management teams are and should closely monitor demand, supply, and pricing trends for end products and prepare to adjust their levels of purchasing accordingly in this time of economic policy ambiguity.