Tech companies are worried — and they probably should be. New Chinese tariffs could have some widespread ramifications, including delaying a switchover to 5G cellular service. The White House could be rendering tariffs against $200 billion of goods from China shortly, and that’s going to have a significant influence throughout the tech industry. In particular, Apple, Dell, Cisco, and Intel are all rallying to mitigate the damage.
It’s no secret that the US and China are currently embroiled in a bitter sequence of retaliatory tariffs. Both countries are intimately related in terms of economy, and the economic strength of China has been steadily growing. Both the US and China regularly sell goods to each other, and China owes a significant amount of the United States’ debt. The tariff war between the two nations ultimately increase costs for the consumers.
However, though companies and economists may shy away from the idea of these increasing costs, the real question is a political one. The United States has been ramping up aggression so as not to back down from the threats that China has rendered. In essence, it’s a war of attrition that will show which country has the greater economic power. Whichever country folds first, whether it is the United States or China, could lose significantly on the political scale.
In response to the new tariffs, Apple has filed an objection with the White House. However, this call fell on deaf ears, as one ultimate goal of many of these tariffs is to bring manufacturing back to the United States. Tariffs on things such as steel have been placed to encourage steel manufacturing in the US, and the idea is that any tariff imposed on goods coming from outside of the country could prompt businesses to begin manufacturing inside of the country.
The tech companies disagree. Intel noted that the tariffs could be “a game changer for the American consumer,” as it could raise the prices of nearly all consumer electronics. Electronics are manufactured overseas due to significantly lower costs, and the consumers are the ones who benefit from these lower costs. Moreover, it could take a substantial amount of time to simply develop that level of manufacturing capability in the United States. Factories overseas are already setup to process electronics, from circuits to batteries.
Though Apple, Intel, and other tech companies may be heading the complaints, it’s not only tech sellers that will be impacted. There are many companies that are worried their supply chain could be disrupted by these new tariffs, ranging from the Whirlpool Corp to Fitbit. Telecommunications companies are worried that the tariffs will delay attempts to upgrade networks to 5G wireless technology, and nearly every industry is worried that these changes could potentially decrease American competitiveness.
If electronic devices cost more, businesses won’t be able to afford the latest technology. Small business owners and consumers are likely to be the hardest hit by rising electronic costs, which could hinder innovation within the United States, as well as artificially depressing the overall economy. Technology is incredibly important in a globalized market: companies today are not just competing with businesses in their own location, but businesses in other countries.
Companies may find it more attractive to outsource their services to countries that have more affordable access to equipment. Businesses that rely upon in-house technology will be the hardest hit. Meanwhile, customers will find themselves less free with their electronic purchasing, which could affect other industries such as the retail sector.
What does any of this mean for a business owner or an investor? Not only could electronics become more expensive to purchase nationally, but it could have some significant impact on companies that have large scale dealings with China. Should these tariffs become effective, companies like Apple and Intel are going to suffer, which is something that will need to be considered when planning out investments. Companies that manufacture within the United States, on the other hand, may actually start doing better, as they will be able to provide goods with unchanged cost.
Regards,
Ethan Warrick
Editor
Wealth Authority
