The Trump Administration has imposed retaliatory tariffs on $200 billion worth of Chinese imports. Starting today, the U.S. will place 10 percent tariffs on those $200 billion in products and on Jan. 1, the tariffs will increase to 25 percent. Immediately after the Trump administration announced a new round of tariffs, the Chinese announced $60 billion in retaliatory tariffs.

Which products were removed from the $200 billion list?

We identified 384 tariff codes that concern the technology industry, but the administration removed only a handful of them. The heavily tariffed product category, connected devices (code 8517.62.00), received some relief. Today, we import $22 billion worth of connected devices from China, which make up 47 percent of all Chinese imports. According to CTA’s 2018 sales and forecast figures, the administration exempted $10.5 billion worth of Chinese imports by removing the products listed below.

• Fitness activity trackers: 20.7 million units, $1.6B wholesale shipment revenues
• Smart speakers: 39.2 million units, $3.2B wholesale shipment revenues
• Smartwatches: 15.3 million units, $3.7B wholesale shipment revenues
• Wireless earbuds: 10.7 million units, $1.1B wholesale shipment revenues
• Wireless headphones: 9 million units, $947M wholesale shipment revenues
• Total: $10.5B wholesale shipment revenues

However, $11.5 billion worth of goods under the same original code – modems (code 8517.62.0010), switches, routers and other potential items (code 8517.62.0020) – will receive a tariff.

Which other major products on the $200 billion list hurt the industry?

In addition to modems, routers and switches, the administration is slapping a tariff on printed circuit assemblies (code 8473.30.11), or PCAs. Today, we import $11.6 billion in PCAs from China, which accounts for 68 percent of all U.S. PCA imports. As an unintended consequence of this tariff, American manufacturers of products that contain printed circuit assemblies will purchase between 6 and 12 percent less from suppliers. More, tariffs will cost the U.S. economy anywhere between $110 million to $613 million annually, for the 10 percent and 25 percent tariffs respectively.

What’s the impact of these tariffs?

American consumers will pay more because of tariffs on these products. Two-thirds of American adults with broadband access will experience price increases for connectivity products and devices with internet access. While most consumers don’t think about the ecosystem making up the internet, these products are the building blocks for a faster nationwide wireless network called 5G. Taxing network equipment and other vital components used in 5G technology will raise the cost of U.S networking infrastructure by hundreds of millions of dollars and reduce the incentives to improve it. Rolling out the next generation of wireless networks, which runs 100 times faster than the current 4G, requires fewer obstacles, not more. Otherwise, the U.S. will fall behind China.

Are some tariffs good?

No. Placing a tariff of up to 25% on Chinese goods is detrimental to startups and small businesses because:

• Input costs will increase, forcing American companies to absorb the pain in one of two ways: pass through the trade tax to downstream industries and consumers or constrain hiring and research and development;
• Foreign companies build where there is not a tariff on needed pieces of manufacturing. As a result, America’s biggest competitors will affirm their dominance over U.S. companies – especially those that need parts from China to build products at home.
• The uncertainty creates a business environment that freezes future business plans.

How can companies seek exclusion from tariffs?

Unfortunately, for this round of tariffs companies don’t have any recourse until Jan. 1, when tariffs increase to 25 percent. At that time, they can apply for exclusions.

Are retaliatory tariffs legal?

We don’t think so – more information can be found in our USTR comments on the $200 billion list.