Don't Let a Trade War Put You Out of Business
June 27, 2018
- Author: Sage Chandler
May/June 2018
More articles in this issue:
How Trump’s tariffs could hurt the tech industry.
Last month, the Trump Administration proposed tariffs of up to 25 percent on $150 billion worth of Chinese goods. Not surprisingly, China immediately retaliated with its own tariffs against the U.S. on items such as pork, wine and soybeans. In a scenario when two trading partners start fighting, it’s easy to see how everyone loses. While the administration’s intent is to punish China for infractions in intellectual property, it is U.S. consumers, businesses and commerce that will suffer from an escalating trade conflict.
Trade involving technology products is particularly at risk. Tech is America’s competitive advantage and the future of our nation’s economy. The consumer technology industry represents more than 10 percent of U.S. GDP, and projections show 2018 should be a record breaker for the sector. However, increased tariffs and the looming threat of a trade war seriously threaten that forecast.
U.S. businesses and consumers will end up footing the bill for new tariffs. For example, the administration singled out televisions as one of the largest proposed categories for a 25 percent tariff. The tariffs would also apply to many of the sub-assemblies of circuit boards that go into TVs and other electronic displays. In other words, the tariffs would hit tech at virtually every level of the value chain, which has consequences for U.S. manufacturing, production and ultimately consumer costs.
With parts of Chapters 84 and 85 of the tariff code included in the proposed tariffs, there is even more potential to hit consumers. Chapter 85, for instance, covers nearly all products relevant to electronic displays and – according to the Office of the U.S. Trade Representative (USTR) – represented the largest group of imports to the U.S. from China in 2016 ($129 billion).
To be certain, China puts onerous requirements on U.S. business, and our government should address these issues and demand transparency for greater IP protection and competition. Erecting tariff barriers, however, would reduce American economic growth and, as we have already seen, invite retaliation from China.
The tech sector is one of the most innovative and quickly moving industries in the U.S., as well as in the global economy as a whole. Supply chains that are interconnected need stability and predictability, and CTA has been working with member companies to provide input to the administration.
The Office of the United States Trade Representative accepted public comments on the proposed tariffs through May 11. If you would like more information on how to get involved, or to let us know how tariffs would damage your bottom line, please email me at schandler@CTA.tech.
Sage Chandler is CTA’s vice president, International Trade.
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