The prices of laptops, smartphones and game consoles can skyrocket after the elections. What most Americans may not even know is that popular tech products haven’t been hit with tariffs — yet.
After the US presidential election, technology companies fear the threat of new tariffs that could limit imports from China. Tariffs are actually taxes on imports that are designed to disrupt trade with foreign nations. Although former President Donald Trump often claimed that China pays the tariffs, in reality, this tax is paid by American businesses and citizens every time they want to buy goods from China. Tariffs as trade barriers can place an economic burden on countries like China, but that burden is only really felt when businesses and consumers avoid importing goods. If companies cannot switch suppliers cost-effectively or for practical reasons, as is the case with China, a dominant global manufacturing center in the technology industry, then shrinking profit margins may prompt US companies to raise prices for consumers.
So after the election, many tech companies worry that they will eventually have no choice but to cover the rising costs of the tariffs by raising the prices of mass-market products, including smartphones, laptops, tablets and game consoles. Currently, more than $300 billion worth of tariffs are imposed on trade with China. The tariffs are said to be aimed at addressing national security concerns and protecting against unfair Chinese trade practices that harm US intellectual property, technology transfer and innovation, but experts warn that some of the tariffs are just political grandstanding.
Most of these expansive tariffs were originally implemented by Trump through a series of executive actions beginning in 2018, but were finalized by President Joe Biden’s administration last May. They applied not only to nearly 50 percent of consumer technology products, but also to the components needed to make those products in the United States, forcing tech companies to either pay to continue doing business with China or find other sources. way to continue to maintain their supply chain at low prices.
However, despite all the tariffs the United States has imposed, most popular consumer technology products are currently exempt from tariffs, despite the country’s goal of preventing technology theft. That’s partly because the Consumer Technology Association (CTA) joined big brands like Microsoft, Nintendo and Sony in successfully opposing Trump’s efforts to impose tariffs on people’s favorite gadgets in 2019. Their lobbying campaign worked: the Trump administration established certain exceptions to the tariffs protecting popular technologies, the most significant of which affected smart watches (e.g. Fitbit and Apple Watch).
In an open letter to the U.S. Trade Representative, the tech industry warned that “taxing” the nation’s best-selling technology would harm Americans. A CTA study, for example, showed that if tariffs were imposed, the price of game consoles would immediately jump by 25 percent. That would “put a new console out of reach for many families” and would collectively cost “$840 million more for consumers who could afford it,” CTA projected. The CTA warned that the proposed 15 percent tariffs on consumer technology would ultimately hurt consumers, workers, retailers and manufacturers, while putting “thousands” of jobs at risk and stifling innovation.
“The result is a net loss of $350 million to the U.S. economy each year the tariffs remain in place and the burden is borne by U.S. consumers,” the CTA study found. And that study only outlined the threat to the video game industry. and did not account for the spillover effects in other industries benefiting from gaming innovations, such as healthcare, retail and education.
Let’s fast-forward to the present day, because customs duties on consumer goods are back on the agenda. On the campaign trail, Trump vowed to continue the trade war with China, threatening 60 percent tariffs on all goods from there. That’s four times higher than the tariffs that caused panic in the tech industry during Trump’s last term in office. “Tariffs hurt individuals,” said Ed Brzytwa, CTA’s vice president of international trade. “They are regressive taxes that hurt people of modest means more than the wealthy.”
Tech companies have shielded consumers from rising costs for years, which is partly why many people may not have known that the election could potentially determine how much, or how much, the prices of popular consumer technologies will rise over the next four years. Mary Lovely, a senior fellow at the Peterson Institute for International Economics, roughly crunched the numbers for a Trump victory. He co-authored a report in August that estimated it would “cost the typical American household more than $2,600 a year” if Trump went through with his plans, which include a 20 percent blanket tariff on all imports.
In May, Lovely shared additional findings at a hearing held by a congressional committee tasked with monitoring US-China relations. He reiterated at the hearing that Trump’s proposed tariffs and tax cuts would likely hit low-income Americans the hardest. In his testimony, Lovely warned that the current tariffs, imposed by Trump and maintained by Biden, are not targeted enough to meet U.S. goals to prevent technology theft. If the United States wants to be strategically important, the thinking goes, it should impose tariffs on popular technology products rather than things like T-shirts or syringes.
If the U.S. were to impose tariffs on any technology product deemed critical to U.S. market dominance and national security, lawmakers would face public anger. That will “undoubtedly come at a cost to American consumers and companies,” and those “burdens must be recognized as the cost of protecting U.S. interests in these sectors,” Lovely told Congress. “If technology theft is the main complaint against China, then you have to own up and tell the American public, ‘we’re going to tax these things,'” Lovely said, instead of fooling people into thinking tariffs are good for them. .
Just this month, the CTA sought to counter the expected damage to the tech industry, releasing a report that found Trump’s proposed tariffs “will cause significant price increases,” potentially nearly doubling the price of laptops. According to the report, the price of game consoles may increase by 40 percent, and that of smartphones by 26 percent. This will immediately shock many industries, potentially diverting resources away from research and development as production is shifted to other countries such as Mexico, Vietnam or India to keep prices low as business costs rise, Brzytwa said.
But it won’t be easy. Pro-tariffs argue that companies like Apple, which use giant factories in Asia and elsewhere to make their devices, will be forced to bring those jobs back to the US and set up factories there. Steve Jobs made this point clear in 2011 when President Obama asked him about bringing manufacturing back to the US. “Those jobs aren’t coming back,” Jobs told him, and Tim Cook would probably agree. Paying an American worker over a Chinese worker would raise the price of devices to an unacceptable level – both for the company and for consumers.
There is also the question of time. Building a factory is a lengthy process, as chip companies are finding as they take advantage of government subsidies now pouring in. It would take years for tech companies to build the kind of manufacturing they need in the US, and it’s highly unlikely they’ll try. Instead, they will simply pass the cost on to consumers, and other industries have already indicated they will do the same.
Currently, technology companies – including small businesses, startups and tech giants – are struggling to find supply chain alternatives as the costs of doing business with China continue to rise and each new administration changes its goals. “I don’t think a lot of people are aware,” Lovely said, “that there are no tariffs on computers and cell phones, but if Trump implements the so-called flat 60, we’re going to see a very, very, very strong response to that from the U.S. -in. This is a significant tax that would be levied on the profits of Apple, HP or Dell products,” Lovely said.
The CTA has been closely monitoring the campaigns and produced two studies that found Trump’s plan would cause “clear and high price increases for products such as smartphones, laptops and tablets, and video game consoles, among others.” Brzytwa said the CTA will not sit idly by and confirmed that the CTA will “continue to speak out” on any proposed tariffs specifically “because of the consumer impact.” “At this point, it’s unaffordable” to do business with China, Brzytwa said, suggesting that Trump’s proposed tariffs are about blocking imports, not protecting American technology.
It’s unclear how quickly prices would rise if Trump or Harris extended the tariffs. According to Lovely, “it’s really up to the manufacturers how quickly they pass the tariff.” He spoke to manufacturers using subcontractors in China who “say they’re not in a position to quickly move their business elsewhere. Those manufacturers would be facing a difficult decision . They could raise prices immediately and send a very clear signal to their customers that it is because of tariffs, says Lovely. Or they could cut back on business, as the CTA has repeatedly warned. I’d just say, ‘You picked this guy, I’ll pass it,'” Lovely said. “But some people might decide that’s not the best thing to do.”
“Small businesses in particular may be reluctant to raise prices because they cannot afford to lose customers,” Lovely suggested. “Demand is not infinitely elastic,” said Lovely. “People will say I’m going to use my cell phone a little longer, I’m not going to replace it every three years.”
Source: sg.hu
