How are Chinese tariffs affecting the US tech sector?

Industry News | | MIC Customs Solutions |

A new report has claimed US importers paid $32 billion in tariffs on Chinese-made tech products since 2018. Is the time right to remove these additional duties?

July marks four years since the introduction of a range of tariffs by the US on a variety of Chinese imports. Imposed by president Donald Trump's administration under section 301 of the Trade Act of 1974, the duties have seen charges of up to 25 percent added to a wide variety of goods, including cars, steel and agricultural products.

However, it is technology products that may have been among the most significantly affected by the move, as China is a major supplier of these items to the US. So what have the consequences been on this part of the US economy four years on?

New report highlights cost of tariffs

The scale of the impact the tariffs have had on the US tech sector was revealed in a recent report from the Consumer Technology Association (CTA). It estimated importers have paid $32 billion in additional duties between the introduction of the new rules in mid-2018 and 2021.

It noted that connected devices, routers, cables, computers and accessories were the goods most affected by the section 301 tariffs, with these accounting for around a third of the total costs.

In an environment where prices are rising across all sectors, the report added that US technology companies are no longer able to absorb these additional expenses without passing them on to customers. As a result, the CTA stated: "for American consumers, this means the technology they love and have come to rely on is less accessible and less affordable."

Ed Brzytwa, vice-president of international trade at the organization, said: "It's clear that the tariffs have not been effective in dealing with China and are instead hurting US businesses and consumers."

How have the measures affected supply chains?

The CTA review also indicated that the imposition of the tariffs has led to American importers turning elsewhere for tech items. It noted that imports from countries such as Vietnam, Taiwan, South Korea and Malaysia all increased since the introduction of the new regime.

Meanwhile, imports of Chinese-produced technology goods directly affected by the tariffs dropped by 39 percent over the last three-and-a-half years. Overall, the share of US tech imports originating from China fell from 32 percent in 2017 to 17 percent in 2021.

The CTA claimed this can be traced directly back to the tariffs, as there has been no corresponding drop in imports for Chinese goods beyond section 301's remit. Indeed, the report noted that in 2021, 84 percent of US tech imports outside of those covered by tariffs were from China, the same figure as in 2017.

Will the Biden administration remove tariffs?

The administration of president Joe Biden has been mulling the removal of the Trump-imposed tariffs for a while, with the Office of the US Trade Representative currently soliciting comments from interested parties as part of its four-year review into the rules.

Mr Brzytwa said that removing these tariffs would be especially beneficial given the current pressures on the economy, especially when it comes to combating the rising cost of living. He stated that withdrawing the section 301 tariffs would help mitigate "rampant and harmful inflation" and help lower costs for American consumers.

This has found some support within the US government, with treasury secretary Janet Yellen indicating earlier this year that this was under consideration. She said: "It's worth considering. We certainly want to do what we can to address inflation, and there would be some desirable effects. It's something we’re looking at."

Elsewhere, a report from Peterson Institute for International Economics estimated that eliminating Trump era tariffs across all product lines - not just section 301 duties on Chinese-made tech goods - could reduce inflation in the US by up to 1.3 percentage points.

This study, however, has been challenged by US trade representative Katherine Tai, who described it as "something between fiction or an interesting academic exercise." While she also said tariffs were a factor that could be looked at to bring inflation down, it is not at the top of the list as the administration needs to take a longer-term view.