Tariffs Impact XR on More Than Price: Uncertainty, Confusion, and Supply Chain Disruption Are Unavoidable

In the tumult surrounding the global economic uncertainty and ongoing tariff war, no market is spared. As of early April 2025, the United States has paused tariffs over 10% for (nearly) all countries—China is an exception, with over 100% tariffs maintained. This is changing rapidly, so discussion around specific percentages, countries, and timelines is unhelpful, but analysis around broad tariff impacts and how companies will be approaching this tumultuous market is still viable and indeed incredibly valuable currently. For the Extended Reality (XR) market, this impact is certainly significant and will have a few key areas of impact: cost, delayed planning thanks to uncertainty, and ongoing disruption of supply chains and manufacturing.

The most obvious impact comes down to cost. Component costs can vary dramatically based on source and current tariff rates—China being a major component and device source, with tariffs as of writing reaching over 100% in relation to the United States, having the potential to entirely kill the feasibility of some XR devices. With XR devices already expensive, technologically complex, and low in volume, these impacts from tariffs are exacerbated even further. Higher margins and economies of scale can help alleviate some impact, but the majority of XR operators do not have these options.

Though cost is obvious, the uncertainty around markets could be worse than the tariffs themselves. A 5% or 10% tariff can be planned around, but a 150% tariff is a non-starter, and at the same time, not a guarantee. It is impossible to plan with these constant changes, especially with the overall severity of the tariffs being pitched. This will pause active investment and development until a semblance of consistency occurs—then, once a known tariff is established, companies can at least plan around that. Few companies will take on significant product and supply chain redesign without a clear timeline or established quantity and impacted location list.

The guaranteed disruption to supply chains will also be hard felt. It is almost impossible to find a purely single-country product currently: Meta, Apple, and Google are U.S.-based companies with hardware components coming through Taiwan, Japan, South Korea, China, and more. Google is relying on Samsung as a key hardware partner for driving the novel Android XR ecosystem as well. Chinese vendors are not much different, with vendors like Pico and DPVR at least using non-domestic chipsets that Qualcomm currently fills. Established supply chains have been a boon for XR manufacturers thanks to the cost and complexity of the devices—not having to build up manufacturing capability, secure parts suppliers, and streamline a supply chain allow a company to more quickly hit the market and react to shifts. With these chains in flux, this incumbency advantage lessens, while the path for new ventures becomes more expensive and convoluted.

One of the actual goals of the tariff back-and-forth is encouraging domestic products and relationships, which will also be true for XR. Using domestic components when possible will be a focus, though it will prove difficult, if not impossible, for the current class of XR products. Some of this is perhaps already being seen, with China-based XREAL’s recent announcement of targeting a US$100+ billion XR ecosystem in Shanghai alone. XREAL is also one of the first Original Equipment Manufacturers (OEMs) with a proprietary chipset in the market, though this came before the recent tariff situation.

With the rate of change surrounding tariffs and the broader economy, it is difficult to look ahead and plan out even months ahead, let alone years as companies prefer to do. There are a few key considerations to make today, however, that are independent of tariff specifics and timing.

• Diversifying Manufacturing and Supply Chain: The most immediate and effective response, though also quite difficult and time consuming, is diversifying manufacturing and sourcing. Most XR products rely on global components—displays, sensors, optics, and chipsets are most notable. Companies should explore alternative manufacturing hubs in countries with lower tariff risk, such as Vietnam, India, Mexico, or Eastern European nations. Although relocating production can be capital-intensive and logistically complex, starting this transition now helps mitigate long-term tariff exposure and builds greater geopolitical resilience. Where alternatives are not available, clear messaging becomes paramount; in the interim, investing in building up alternatives can prove worthwhile, if not necessary, over time. Even if tariffs unexpectedly return to pre-2025 levels, relationships and disrupted supply chains take time to recover, so these investments are not wasted, but instead bolster standing.
• Cost Management and Product Redesign: XR companies must reevaluate their Bill of Materials (BOM) and look for opportunities to redesign products with alternative, domestic, or lower-tariff area components. Engineering teams can also focus on modular designs that separate high-tariff and low-tariff parts, allowing for easier customization and manufacturing flexibility. Simultaneously, firms should audit their pricing strategies and consider staggered releases or tiered product lines that cater to both cost-sensitive and premium markets, helping offset price increases.
• Policy Engagement and Messaging: The XR industry must collectively advocate for fair trade policies by engaging with trade associations and policymakers. Working through organizations like the Consumer Technology Association (CTA), VR/AR Association (VRARA), and Augmented Reality Enterprise Alliance (AREA) can provide data-driven arguments about how tariffs harm innovation, consumer access, and technological leadership. Public communication is equally important: transparency with consumers about pricing changes and supply chain shifts helps maintain brand trust and some additional clarity among the uncertainty.