CTA Warns of 'Significant Harm' to Tech Industry if Latest Tariffs Are Enacted

CTA identified 380 tariff codes that would cause “significant harm” to the consumer technology industry’s member companies and to consumers resulting from the third installment of Trade Act Section 301 duties against Chinese imports, blogged Sage Chandler, CTA vice president-international trade, Tuesday. She cited codes identifying items that allow access to the internet, including servers, desktop computers, printed circuit assemblies and connected devices. Connected devices cover a "vast array of tech products" including e-readers, smartwatches, speakers and fitness devices, plus the components and the infrastructure products that make them work, such as modems, routers and gateways, Chandler said. Tariffs, as a remedy to shortcomings in Chinese national policy and practice, are more likely to cause “adverse short- and long-term consequences to our economy than incentivize change in China's discriminatory IP practices,” she said. If enacted, new tariffs affecting $200 billion in trade will continue the “destructive ripple effect” the Trump administration started with the first round of tariffs that affected the tech industry and the U.S. economy as a whole, Chandler said. Products on the proposed tariff list “disproportionately impact small companies, many of which manufacture and assemble in the United States, and startup companies that design and engineer U.S. intellectual property.” A CTA study said 25 percent tariffs on printed circuit board assemblies and connected devices will cause price increases of up to 6 percent, even affecting products made entirely with U.S. labor and components. CTA estimates those increases will cause a consumer spending drop of 12 percent. “Price shock and drop in demand have the potential to devastate our industry,” said Chandler, with the impact of a 25 percent tariff on connected devices alone expected to cost American consumers an extra $3.2 billion annually. “That contradicts USTR's stated aim in the product selection process of avoiding goods commonly purchased by American consumers,” she said. Technology tariffs are “counterproductive,” said the trade specialist, at a time when the U.S. is looking to achieve “digital integration, advanced telecommunications technology and increase internet access for rural populations.” Tariffs are taxes on Americans, not foreign governments, she said, and they "undermine the competitiveness of American companies.” Tech firms that testified Tuesday in a second day of public hearings on the tariffs were asked about the practicality of sourcing products from countries other than China. Brilliant Home Technology did an "evaluation" of where it could source products other than from China, and did so "before we knew about tariffs," said CEO Aaron Emigh. The company found quality in Vietnam and Indonesia couldn't match Chinese standards, he said. India could manufacture the product well, but since most of the components come from China, extending the supply chain in that way would introduce risks Brilliant felt weren't worth it, he said. "In our estimation it was not practical to manufacture anywhere outside of China," he said.