Since the Trump administration has sparked a trade war with China, one wondered what kind of impact this could have on the consumer electronics market. The Consumer Technology Association has released its own report estimating the potential impact of the latest series of Trump administration tariffs on Chinese products with an additional value of $ 300 billion.
Before diving, here is the current state of things. The United States and China appeared to be in the process of concluding an agreement earlier this year that would resolve previous phases of the trade war when the Chinese would have made significant negative changes to their bargaining position (from the point of view of view of the United States). The United States has threatened to add 25% tariffs to an additional $ 300 billion worth of Chinese products. Combined with the tariffs already levied on Chinese products, the end result would be to apply tariffs on virtually all imports from China, including finished computers and mobile phones – two previously excluded categories.
The CTA is a commercial organization and it can be assumed that it is anti-tariff – but that does not mean that the organization's estimate of the short-term or long-term effects of a tariff surge is false. However, we must be aware of it because we are the results.
CTA predicted That the price of the import on China smartphone would increase by 1.22. China accounts for about three quarters of our total smartphone imports. It is unclear whether this report takes into account recent statements such as that of Foxconn, which claims It can meet the demand of US iPhone from non-Chinese sources. (The CTA report considers the idea that manufacturers will transfer production to non-Chinese facilities, but does not divide what individual companies will do in response to a potential $ 300 million tariff) .
Korea and Vietnam would benefit from an increase in exports linked to rising phone imports for US markets, but US consumers would pay $ 8.1 billion more for smartphones. The CTA predicts a net economic loss of $ 4.5 billion, even after calculating the benefits of the rates themselves.
Tablets are hit by similar measures. Prices are expected to reach 1.19 times, which would result in a 1.35-fold reduction in sales. Since there is virtually no production of tablets in the United States (like smartphones), net manufacturing in America would have no advantage. I trust CTA with regard to these findings – America does not build smartphones or tablets, and very few computers are actually assembled here. Tariffs can be used to boost domestic production at the expense of international trade, but if you do not have a national base to start with.
The organization predicts large price gains of 1.19x to 1.22x for video games, tablets, smartphones and drones. None of the tariffs resulted in a net positive result for US manufacturers because the United States does not manufacture most of these products. Prices on laptops could increase by $ 150, while tablets could jump $ 50.
I suppose that if these rights come into effect, the concrete result will be more nuanced than what the OTC describes – and could also be affected by Huawei's current situation. The efforts of the United States to strangle this Chinese society are far more unusual than tariff rumors, and I can not imagine that this is not a major asset in the negotiations between US and Chinese officials.
I think companies will try to minimize the impact of these rights on certain products, absorbing all or part of the impact, while passing them directly to customers for products with low profit margins. and that there is no solution. dining room the cost. At the same time, every company able to move its production out from China to dodge the tariffs will do it.
In the long run, this will likely give some ability to return to basic pricing as the new production goes online. Declining demand for Chinese-made products could reduce their prices, thus reducing the relative size of the applied tariff. Not everyone will be able to export their production out of China, at least not right away, and some worries about the possibility of a slowdown in global trade are real.
Of course, there are other concerns to balance. One could argue that the value of a cheap 4K TV is less important than the technological advantage that allows American companies to continue to push the boundaries of technology as a whole. Forced technology transfers and intellectual property theft have been two major concerns of the Trump administration and the Obama administration before it, but the TA has chosen to be much more aggressive in its way to manage these problems. Some pointed out that this strategy could turn against the long term if it encourages China to stop working with the United States completely in the long term and prepares the ground for the two largest economies to be in economic war. rather than continuing to cooperate.
It is good to consider all these points. Trade is a complex and multifaceted subject. There has been a note of uncertainty in the global economy about these issues, and various financial institutions would clearly prefer to see them resolved amicably. The CTA's analysis of the economic disadvantages of customs duties must be treated with a grain of salt, while leaving at least a window on the possible results.