Donald Trump has exempted selected tech devices, including smartphones and computers, from his reciprocal tariffs in his latest economic war move.
The exemptions were revealed in new guidance published by the US Customs and Border Protection agency. It comes after Trump imposed 125% tariffs on products from China earlier this month in what he dubbed ‘Liberation Day’. The Republican’s move was set to take a huge toll on tech companies which use China to manufacture the majority of their products. Apple found itself in the spotlight as many questioned what the impact of tariffs would be on the hugely popular iPhone.
Trump himself touted the idea of iPhones being manufactured in the US, however Apple and a whole host of experts and analysts agreed that the idea was a non-starter. White House press secretary, Karoline Leavitt, told reporters on Tuesday that Trump believed Apple’s recent announcement of a $500 billion (£382.2bn) investment into the US, along with rising import costs as a result of the tariffs, would encourage the tech giant to ramp up manufacturing in the US.
But the latest guidance from US Customs and Border Protection appears to step away from that idea, as smartphones are set to be exempt from reciprocal tariffs. The new guidance also includes exclusions for other devices and components – including solar cells, flat panel TV displays, memory sticks, memory cards, semiconductors and solid-state drives used for storing data. These popular electronic devices and pieces of tech usually aren’t manufactured in the US, with potentially setting up domestic manufacturing in America projected to take years.
Though any reprieve this brings may not last, as exclusions stem from the initial order, which prevented extra tariffs on certain sectors from piling up cumulatively on top of country-wide rates imposed as part of the reciprocal tariffs, reports Bloomberg. The exclusion of these products, commonly made in China, could be an indication that they may soon be subject to a separate tariff, albeit almost certainly a lower one for China. So far, tariffs on certain sectors have been set at 25%, though it’s not clear what the rate on tech items would be.
For importers in the US, Trump’s tariffs on China have left them reeling, with one even calling it the “end of days”. Rick Woldenberg runs an educational toy company in the Chicago area. When Trump announced a 20% tariff on Chinese imports, he said he “made a plan to survive 40%” and thought he was “being very clever”.
The CEO of Learning Resources, a third-generation family business that has been manufacturing in China for four decades, said: “I had worked out that for a very modest price increase, we could withstand 40% tariffs, which was an unthinkable increase in costs.” Now, his worst-case scenario has been decimated by the reality.
Mr Woldenberg believes that the hike in tariffs on China will push his company’s tariff bill from $2.3 million (£1.76m) last year to $100.2 million (£76.6m) in 2025. He said: “I wish I had $100 million. Honest to God, no exaggeration: It feels like the end of days.”
For decades, and especially since China joined the World Trade Organisation in 2001, Americans have relied on Chinese factories for a whole host of proudcts. As tensions between the world’s two biggest economies — and geopolitical rivals — have risen over the past decade, Mexico and Canada have supplanted China as America’s top source of imported goods and services. But China is still No. 3 — and second behind Mexico in goods alone — and continues to dominate in many categories.
China produces 97% of America’s imported baby carriages, 96% of its artificial flowers and umbrellas, 95% of its fireworks, 93% of its children’s coloring books and 90% of its combs, according to a report from the Macquarie investment bank. Over the years, American companies have set up supply chains that depend on thousands of Chinese factories. Low tariffs greased the system.
As recently as January 2018, U.S. tariffs on China averaged just over 3%, according to Chad Bown of the Peterson Institute for International Economics. Joe Jurken, founder of the ABC Group in Milwuakee, which helps US business manage supply chains in Asia, said: “American consumers created China. American buyers, the consumers, got addicted to cheap pricing. And the brands and the retailers got addicted to the ease of buying from China.”
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