Key Takeaways
- The Trump Administration temporarily rolls back planned tariffs on certain electronics from China.
- Beneficiaries are major electronic brands like Apple that rely heavily on Chinese manufacturing.
- The decision reduces the threat of price hikes and could mean price stability for the time being on items such as iPhones.
Good news from the US seems to be in short supply these days. But some good news did drop last week with the announcement by US Customs and Border Protection that US tariffs are temporarily being lifted on electronics coming out of China.
Tariffs seem to be the only thing on every politician’s lips these days, whether it’s the Trump Administration imposing punitive tariffs on other countries or others retaliating with their own tariffs.
‘Trade war’ has been frequently uttered by the media.
The White House’s U-Turn is (Hopefully) The Consumer’s Gain
China was the worst hit, with tariffs as high as 145%, which would have meant laptops surging in price by as much as 45%. A new iPhone would have set you back well over $2K.
This would have been a serious problem for Apple, whose iPhone manufacturing plants are nearly all based in China, with 80% of the iOS devices coming from there going to the US.
But the White House’s decision to quietly and temporarily pause most of the China tariffs hopefully means that when you buy your next iPhone in the next few months, you won’t have to take out a bank loan.
That said, if you plan on buying things like motherboards, you should know that China is still being charged a 20% tariff on those. The tariff exemptions don’t cover everything.
The Commerce Secretary, Howard Lutnick, went to great pains to stress that the tariff relief was only temporary, with new separate tariffs likely coming in a few months.
Nobody will be fooled, though, by the decision to relax the tariffs. By imposing sky high prices, Washington DC more or less made the cost of electronics prohibitive.
Some companies, such as Nintendo, were already raising prices by 10% in anticipation of the tariffs coming down the line.
What Was Not on the Exemption List is More Telling Than What Was on it
The tariff exemptions took effect retroactively on April 5th at 12.01 am. A huge list of electronics now spared from the executioner’s axe was issued, all with vague-sounding HS numbers (Harmonized Tariff Schedules).
But what those corresponded to was telling, especially if we think back to the tech CEOs that contributed to the inauguration fund and/or campaign.
A variety of them donated $1M apiece – Tim Cook, Jeff Bezos, Mark Zuckerberg, and Sam Altman, to name four – who will now benefit from much-needed electronic components being exempt from China tariffs.
Some of the biggest, most notable electronics included in the reprieve were smartphones, semiconductor devices, integrated circuits, LED lights, and flat panel displays. And many, many more.
In other words, the backbone of the worldwide electronics industry, producing devices needed the world over.
But saying that, what was not included in the exemption list was startling – laptop cases, motherboards, and PSUs. So some price hikes may still be coming if these components are still hit by the tariffs.
Some Are Unhappy About the China Tariffs Decision
As usual, though, when one side celebrates a win, the loser glowers and starts complaining. In this scenario, the losers are US-based businesses such as Apple.
These manufacturers have already spent a small fortune moving their operations back to the US. Apple was committed to a $500 billion investment plan to bring some of its manufacturing back to the US from China. Similarly, Nvidia plans to do the same with a domestic production chain.
But with China’s tariff bill now down to 10%, those US manufacturers have suddenly got a serious competitor again in the rear-view mirror.
Big Tech Gets a Reprieve – But Will They Drop Their Prices Now?
Now that tech companies like Acer will no longer be looking down the barrel of the tariff gun, will they drop their prices again? That’s the real test. Companies are usually loath to drop prices once they’ve raised them.
But with tariff relief potentially only for a few months, companies like Apple may have to start investing in more diverse supply chains. The uncertainty in the months ahead may intensify the pressure on these companies, not alleviate it.
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