The impact of tariffs on American BTCMiner: change or not

Author: Tom Carreras, Source: Coindesk, Translation: Shaw Jinse Finance

Will tariffs end the golden age of Bitcoin mining in the United States?

In the summer of 2021, after China banned cryptocurrencies, a large number of mining industries were forced to relocate to countries with low electricity costs such as Kazakhstan, Russia, and Canada. However, the biggest beneficiary of this wave of migration is the United States. Over the past four years, the United States has surpassed all other countries in terms of computing power (meaning that more bitcoins are produced in the United States than anywhere else).

However, the tariff policy announced by President Trump on April 2 (not yet implemented) may increase the cost of supercomputing ASIC mining machines used for bitcoin production. Only a few companies know how to manufacture these ASIC mining machines, and most of their manufacturing factories are located in Southeast Asia, which faces tariffs of about 10% to 50%.

Several experts have indicated that while the new tax may not make it too costly for American miners to import new machines, it could slow down the industry's expansion in the United States.

Talas Kulyk, CEO of Bitcoin hardware company Synteq Digital, said, "In the foreseeable future, the United States will still be the main source of global computing power, but as the Bitcoin mining business becomes more globalized, the absolute dominance of the United States may gradually weaken."

He added, "The growth of computing power in the United States will definitely tend to stabilize relative to other countries entering this field on a large scale. Pakistan has just announced that it will provide 2000 megawatts of electricity for Bitcoin mining. Ethiopia and other countries also have various projects in progress. They will definitely account for a considerable share of the growth in computing power."

Tariffs are just a small piece of the whole puzzle. Other factors, such as the huge demand for new data centers specifically for artificial intelligence (AI) and the decreasing number of ideal locations in the United States for companies to set up mining facilities, may have a greater impact on miners' choice of operating locations.

In the short term, businesses in the United States can still use the active second-hand market to obtain mining machines without paying tariffs. However, in the long run, ASIC manufacturers are taking measures to produce mining machines domestically in the United States.

People seem to generally believe that tariffs will not destroy the U.S. bitcoin mining industry, but rather just become a new variable that this fast-changing, highly competitive industry must deal with.

Clenching Teeth

In April this year, tariffs were mainly a challenge for miners, as the tariffs were suddenly introduced and the magnitude was large. Miners and logistics companies rushed to transport ASIC chips to the United States before the policy was implemented to avoid paying high taxes, but the White House postponed the deadline for a few months.

However, mining companies have now adapted to the current situation where the prices of imported ASIC miners are at least 10% higher than before, but it is still uncertain whether this will become the new norm. The Trump administration is still in trade negotiations, and the court system has not yet made a clear ruling on the legality of its new policies.

Lauren Lin, director of the Bitcoin hardware company Luxor Technology, said in an interview: "It may take a long time to clarify what the tariffs will look like, at least until the Supreme Court makes a ruling. We expect this may take several months, even more than a year."

Meanwhile, Luxor (which also operates a freight forwarding business) has not found any signs of panic among its clients. However, Lauren Lin said that there has been an increase in questions about how to prepare for policy changes in Washington. Lauren Lin also said that there are no signs of slowing down in the ASIC secondary market (where US companies can buy second-hand, cheaper mining machines). In other words, miners are still making steady progress.

But new challenges also arise, such as tariffs that will affect the import of electrical hardware. For example, transformers are mostly manufactured overseas and have been difficult to obtain before April. Tariffs will only make the situation worse. According to a person from a cryptocurrency trading organization, this is more frustrating for miners than the tariffs on ASIC mining machines.

Jeff LaBerge, head of capital markets and strategic planning at Bitdeer, said in an interview that overall, the White House's initial tariffs on Southeast Asian countries should only be seen as the starting point of a policy that may evolve over time. "We are very optimistic that there will ultimately be a reasonable outcome," he said.

Made in the USA

According to TheMinerMag, the $300 billion ASIC market is dominated by the Chinese company Bitmain, whose mining machines provide about 80% of Bitcoin's computing power. Its competitors include MicroBT, Canaan, and Bitdeer.

Most of these companies produce ASIC miners in Malaysia, Thailand, and China. However, MicroBT already has at least one factory in Pennsylvania, and Bitmain announced in December that it will launch a new production line in the United States. Canaan has also completed trial operation in the United States, which means that if willing, it now has the capability to produce ASIC miners in the United States.

The tariffs of the Trump administration are achieving one of their stated goals (promoting the development of the U.S. industry) as they are encouraging these ASIC manufacturers to expand their operations in the United States.

Jia Nan Yun Zhi stated that although the production cost is higher in the United States, its advantage lies in being closer to customers geographically and reducing supply chain risks. The company said it is currently exploring the possibility of cooperating with existing US manufacturers to meet its own needs. MicroBT is also studying ways to avoid tariffs by increasing US production.

Bittexilu sees this as an opportunity to seize market share from existing companies. 'We hope to move as much of our business to the United States as possible,' Raberg said, 'but this will take some time to gradually progress.'

He added:"As a mining machine manufacturer and miner, we have great autonomy, because the mining machines we produce always find a home, whether in our own data centers or in third parties." Bitdeer has mining operations in Texas, Ohio, and other locations.

Since announcing tariffs in April, Bitmain has not revealed any new plans to expand production in the United States. However, Kulyk of Synteq said the company may want to demonstrate that its production in the United States aligns with the goals of the Trump administration. Bitmain has not responded to this.

Anyway, people seem to generally believe that expanding production capacity in the United States will be a slow and costly process.

"Whether we can expand the scale of machine manufacturing in the United States depends on our ability to reduce costs and the demand of American customers. If the demand from American customers is low, then it does not make sense to produce here," Ganaz expressed," In addition, if the tariffs on products from Southeast Asia are ultimately low, then we may not necessarily need to establish manufacturing capabilities in the United States."

The end of the golden age?

Therefore, miners are quickly adapting to the new reality brought by tariffs, and ASIC manufacturers seem ready to increase local production. However, Bitcoin's hashrate in the United States (currently accounting for over 40% of the global hashrate) is unlikely to maintain rapid growth as it did in the past four years.

On the one hand, tariffs do have an impact. Bitcoin mining is a fiercely competitive industry, and companies are always looking for ways to cut costs. If choosing to open a new mining facility between Texas and Ontario, tariffs may tilt the final decision towards the latter.

However, more importantly, it is becoming increasingly difficult to find new locations in the United States that meet the requirements for starting a bitcoin mining business.""Most of the easily achievable goals in the United States have already been met," Raberg said.

Not to mention that the competition for Bitcoin mining has become even more intense. To enhance the capability of artificial intelligence, dedicated data centers for high-performance computing (HPC) are emerging across the country, with major players in the industry - Microsoft, Meta, Google - being financially strong. If a location is suitable for both mining and high-performance computing, the likelihood of miners winning in the bidding war is slim.

They may not necessarily be willing to do so. The construction of high-performance computing (HPC) data centers is more complex and requires higher capital investment, but they can also bring higher profits; this has prompted many Bitcoin mining companies to enter the field of artificial intelligence.

Kulick said, "High-performance computing (HPC) chasing electrons will be the main theme in the next two to ten years. Bitcoin miners are bound to become targets for acquisition and integration in this field... as an industry, they are likely to be acquired or integrated into the overall digital computing field."

Due to the technical complexity required to build and operate high-performance computing centers, this phenomenon is likely to be limited to the United States. Given the ongoing artificial intelligence competition between China and the United States, political factors also play a significant role. In other words, Bitcoin miners outside the United States will not be affected by the rapid growth of the high-performance computing industry.

Laberg said that for American miners, the future direction may no longer be to expand megawatts, but to increase efficiency.

He said, "If you look at the global computing power now... the efficiency of most mining machines is at 30 J/TH or higher." In contrast, the latest generation of mining machines from Bitmain and Bitdeer has an efficiency close to 10 J/TH. "In today's economic situation, at best, this can only be considered a small profit."

"All these mining machine platforms need to be updated," he continued. "We believe that in the next three to five years, this is a potential market of 40 billion to 60 billion U.S. dollars annually."