How Will The President’s Tariffs on Chinese Goods Affect The Technology Market? (Questions/Answers)

President Trump’s move to impose hefty tariffs on Chinese imports has U.S. businesses and consumers worried about higher prices for the tech products they need.   

On June 15th, 2018, the Trump Administration imposed a 25 percent tariff on up to $60 billion worth of Chinese exports. This includes technology solutions.

And on July 10th, they said that by August 30th, they would impose a 10 percent tariff on $200 billion USD in Chinese-made products, including electronics.

President Xi Jinping has vowed to strike back.

How Will This Affect U.S. Technology Companies?

This move to raise tariffs on Chinese goods also increases the likelihood that China could strike back. How? – they might keep U.S. companies from doing business there. And tech businesses are especially vulnerable in this regard.

Semiconductor supplier, Micron Technology is the latest U.S. company to get caught in the Chinese-U.S. trade war.  On July 5, 2018, Micron reported that a court in China issued a preliminary injunction that prevents their Chinese subsidiaries from selling some of their products in the country.

Chinese rival company, United Microelectronics Corporation (UMC),  filed a lawsuit alleging that Micron had violated their intellectual property rights. Micron says that the lawsuit is a revenge tactic to get back at them for the criminal and civil lawsuits they filed with Taiwanese authorities against UMC for the misappropriation of Micron’s trade secrets.

The ban will prohibit Micron from selling 26 of its products, including Crucial and Ballistix memory modules, solid-state drives, and their memory chips for graphics cards.

What Else Can China Do?

Because China’s imports from our country don’t match the new tariffs, tech businesses worry that they could impose other restrictions, such as inflicting new taxes and adding regulations on US companies.

This could result in a slow-down of deal approvals.  For example, San Diego-based mobile-chip giant Qualcomm is still awaiting their clearance from the Chinese government to acquire NXP for $40 billion USD.

Any Good News Here?

China’s government hasn’t said it will target the technology sector as one of their retaliation threats, but this certainly is a possibility if a trade war were to escalate. However, even if this did happen, the big tech companies in the U.S. probably won’t be affected.

For example – because the Chinese government has already blocked many U.S. companies, like Facebook and Google, these services shouldn’t be affected. So if tariffs target these firms, we shouldn’t have to worry.

Chinese government censorship rules have prevented our tech companies from getting a good foothold there. So, they don’t have a large presence in China anyway. Because of this, any tariffs imposed on them wouldn’t have a substantial effect.

What About Apple Products? Don’t They Have A Huge Investment In China?

Of all the tech companies, Apple would be the most vulnerable in terms of tariffs.  In 2017, they had $46 billion worth of iPhone and related product sales in mainland China, Hong Kong, and Taiwan. This represents roughly 20 percent of all their sales.

However, the good news for Apple is that, due to their manufacturing partnership with Taiwanese firm Foxconn in China, they probably won’t feel the full effects of tariffs.

Apple has been investing heavily in China. As recently as February 2018, they put a new data center in China to comply with new laws there.  Apple has made a number of concessions to the Chinese government to do business there. China probably won’t “mess with them” because they’ve invested billions of dollars in the country.

How Will These Tariffs Affect Technology Prices For Businesses and Consumers In The U.S.?

It’s true that U.S. businesses and consumers are worried about higher prices for tech products due to the tariffs. But it’s still not clear how everything will pan out. Here’s what we do know.

Technology products like network routers, smartphones, laptops, and computer components will likely be affected.  It’s believed that retailers will absorb the costs.  This could result in an approximate 15% price rise for these products.

For those businesses that buy in bulk and operate on slim profit margins (like Amazon), it’s anticipated that they will raise their prices for these products by just 1- 2%. So that’s more good news.

Tariffs on semiconductors could raise the price of a laptop by 3%.

What Should Your Next Step Be?

It’s a simple fact – you must embrace the digital era if you’re going to survive in today’s competitive marketplace. This means you must invest in technology that helps you operate more efficiently, streamline day-to-day operations, automate tasks, and improve collaboration amongst staff members and customers.

And, it’s probably best to do this now before the additional tariffs take effect August 30th.

Forbes offers information on prioritizing technology and how to pay for it, but it’s vital to make those investments now BEFORE we see price hikes.

A good technology solutions provider can help you get started and make sure you’re headed in the right direction. But it’s imperative to move now before we see prices increase.

If you enjoyed this article, don’t forget to check out “Are you scared of the cloud?” or “Protecting your organization for IoT exploits (research/information)” or visit our blog for more helpful ideas.

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