i3 - November/December 2018 - 46

Policy

By Sage Chandler

P O L I CY U P DAT E

Understanding Trump's Tariffs

How Does this Affect the
Tech Industry?

In the latest round of tariffs - $200 billion list - the Trump Administration
spared $10.5 billion worth of connected
devices imported from China, such as
fitness activity trackers, smart speakers,
smartwatches, wireless earbuds and
wireless headphones. While this was a
small victory for many in the tech
industry, others weren't as lucky to find

their products taken off the lists.
By exempting these products, the
Trump Administration may feel it has
helped certain Americans. But all tariffs are taxes and they create trade wars.
On the list remain $11.5 billion worth
of networking goods, including
modems switches, routers and $11.6
billion worth in printed circuit assemblies (PCA), which accounts for 68 percent of all U.S. PCA import.

25%
TAX

could slow
U.S. output
by

$332

billion
over the next ten years.

NOVEMBER/DECEMBER 2018

As an unintended consequence of a
tariff on PCA, American manufacturers
of products that rely on imported
Chinese PCAs will cut orders some six
to 12 percent from suppliers because
the cost will rise by nine to 23 percent.
These costs ultimately will be passed on
to American consumers and could
increase prices on electronics by up to
six percent. More, tariffs on PCA will
cost the U.S. economy anywhere
between $110 million to $613 million
annually, for the ten percent and 25
percent tariffs respectively.

What Impact will this have
on Businesses?

Tariffs will cost the U.S. money, jobs
and our innovative spirit. During the
United States Trade Representative
hearing in August, this is what CTA
member companies said:
Aaron Emigh, Co-founder and CEO
of Brilliant, a Californian company that
created a smart home control device:
"It would cost approximately a million
dollars and take many months to relocate manufacturing outside of China.
These costs and timelines are not practical for Brilliant, as a small startup
company with modest resources.
Essentially, the proposed tariffs amount
to a punitive tax on selling US technology, manufactured by a US company, to
the domestic market."
Mark Karnes, vice president, strategic planning and business development of Illinois' Cedar Electronics,
maker of aftermarket products such as
CB radios, jump starters and dashcams: said, "The products that are
impacted at the 25 percent tariff level
have a dramatic effect on 60 percent of
our company's annual revenue. The
dramatic increases in our product
costs are making us less competitive
with our foreign-based competition
and the substantial loss of income
from our main product categories of
I T I S I N N O VAT I O N

Wild Pixel/Getty Images

he trade war with China is charging forward and the
implications on the U.S. could linger into the future.
On September 24, the U.S. began collecting 10 percent
tariffs on $200 billion in Chinese imports - this tariff will shift
to 25 percent if things are not resolved by January. On top of
that, the U.S. is collecting tariffs on washing machines, steel
and aluminum. Combined all these tariffs will cost the economy
$30.4 billion and eliminate nearly 100,000 jobs according to
the Tax Foundation.

i3 - November/December 2018

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