July/August 2018

More articles in this issue:

• Pay Dirt
• LiDAR Lights the Way
• Cryptocurrency Is Impacting Traditional Sports/Esports
• iRobot’s Colin Angle
• There’s No Place like a Smart Home

You are probably aware of the months-long war of words, threats, tariff actions and promises of retaliation between the U.S. and China. What began as a Trump administration investigation into the Chinese theft of American intellectual property (IP) quickly escalated into $300+ billion in tariffs being threatened- and levied - against imports and exports between the two nations. While it is true that American companies doing business in China often face business problems including IP theft, CTA has long argued that any action taken to address these problems should not include the use of tariffs that will harm our own economy.

CTA’s communications with member companies on the issue provided ample evidence that tariffs – and resulting retaliation – would wreak havoc on global supply chains. Even companies not immediately impacted by the initial round of tariff levying would eventually feel the strain as commodities become more expensive, job losses rise, and consumers purchase less due to higher costs and lost income.

Two studies commissioned by CTA and the National Retail Federation tell a troubling story. The first focused on the targeted tariff categories of televisions, monitors, batteries and printer cartridges. It found that, even accounting for alternative sources of supply, tariffs would increase U.S. consumer prices for televisions imported from China 23 percent, forcing consumers to pay an additional $711 million.

The second study looked at overall economic impacts. It found the administration's tariffs on $50 billion of Chinese imports, coupled with retaliation promised by China, would reduce U.S. gross domestic product (GDP) by nearly $3 billion and destroy 134,000 American jobs. That means four jobs lost for every one gained, and job loss could be expected in every state, mostly for less-skilled workers. More, tariffs would significantly reduce the economic benefits of the administration’s recent tax reform and deregulatory efforts, bringing uncertainty to U.S. businesses and devastation to workers in key states.

The overall trading relationship between the U.S. and China is essential to CTA and our member companies, which rely on the global supply chain to conduct business. Of the 1,000 products so far proposed to receive the additional 25 percent tariffs, CTA members have identified more than 200 products which would disproportionately impact their businesses.

Of the companies that have responded to CTA’s surveys requesting information on the economic and operational impact of the proposed tariffs, 79 percent are small businesses and four out of five said they either cannot switch their sourcing from China to another country or do so without a costly disruption to their business. Some members said the tariffs put them at a disadvantage relative to their competitors in other nations. They fear those competitors would be able to undercut them in the market by continuing to import critical components from China. Other startups fear that tariffs and the resulting economic uncertainty would prevent their products from going to market entirely.

Ambassador Lightheizer, the President’s chief trade negotiator, has stated that tariffs are an important negotiations tool. Although TV sets were removed from the list of products which will now receive a 25 percent duty beginning July 6, most of CTA members identified products that will remain on the list. China's retaliation will also take effect on July 6, which primarily targets agriculture products. The administration's use of tariff measures shows no sign of letting up in the near future. The administration is considering tariffs, not only on China, but on all foreign automobiles and, as with steel and aluminum, affected nations have vowed additional retaliation.

CTA is collecting information about the impact of tariffs on our industry. If your company is impacted, please share your story by contacting me at: schandler@CTA.tech.