What Trump’s tariff reversal (and escalation on China) means for the future of cybersecurity

By Vytautas Urbonas, CMO at Ondato

The Wall Street stock rally due to President Trump’s consecutive actions, including the suspension of most U.S. trade tariffs and intensified Chinese penalties, will result in long-term turbulence for the cybersecurity sector. While headlines focus on macroeconomic shifts and volatile stock tickers a less visible threat is emerging: rising cybersecurity costs and shrinking service availability.

The China exception: Cybersecurity hardware in the crosshairs

Let’s start with the hardware. Firewalls, intrusion detection systems, secure routers, and encrypted networking gear, which make up a major part of the global cybersecurity infrastructure, rely on production or assembly in China. According to OEC, during the first month of 2025, the main exports from China to the U.S. were telephones ($4.41B), computers ($3.88B), and electric batteries ($1.91B). The new challenges now with an unprecedented tariff rate of 125%, forcing companies that use security hardware from China to decide among spending more budget on procurement, passing that cost to customers, or choosing alternative suppliers.

The situation creates particular problems for SMEs. Large enterprises possess negotiation power to modify supplier agreements or shift their supply chains to different locations. Compared to smaller businesses, whose existing financial challenges make high-end security hardware unaffordable. A survey from Analysys Mason revealed that less than 22% of SMEs feel protected against cyberattacks, and only a few have internal security specialists or are working with a third party. In this moment, when ransomware attacks and data breaches continue to increase rapidly, multiple organizations face the worst security risk at this juncture.

Compromised safety for services

Surprisingly enough, digital services, which include cloud security alongside encrypted communications and compliance automation, will face the same price volatility as other goods. A significant portion of these services is highly dependent on equipment components, which must be imported from foreign countries. The rising price of hardware will affect managed security services costs as providers need to upgrade their physical infrastructure or expand their current setup.

The global cybersecurity service architecture may start to split into separate entities if China implements restrictions on its digital services and cloud infrastructure during U.S.-China tensions. As a result, the software code that originates from the USA will not necessarily match the location of the physical servers that operate it.

Compliance costs will rise

Financial institutions, fintechs, and online services have already faced existing pressure to comply with changing KYC and AML requirements. The average cost of carrying out a single KYC review has increased by 17% since 2022 to $2,598. Given the tariff situation, the cost of achieving compliance will continue to increase due to the rising prices for trade-based secure data storage, identity verification platforms, and encrypted communications tools.

Early-stage companies and emerging markets will be the sectors that suffer the hardest impact of this cost. Onboarding customers securely and aligning with regulations is expected to be harder as the assisting tools for this particular task will become less affordable and accessible. As a result, this exposed aspect could easily become a vulnerability for financial crime and decrease digital trust, collectively slowing down the global efforts to fight these issues.

Although the new tariffs pose significant challenges, there is a silver lining:

These trade tensions are tough, but they’re also a catalyst for innovation. We’re already seeing a shift toward manufacturing hubs in India, Vietnam, and Eastern Europe – regions that can help diversify and strengthen the cybersecurity supply chain. This is a pivotal opportunity for U.S. and EU-based cybersecurity firms to scale up, secure more investment, and reduce reliance on unpredictable foreign suppliers.

About the author

Vytautas Urbonas is CMO at Ondato, a RegTech company based in the UK.

Article Topics

cybersecurity  |  digital identity  |  Ondato  |  regulation  |  U.S. Government