List 4 Tariffs Would Do More Harm to Tech Sector Than Current 25% Duties, S&P Says

Even at only 10 percent, the List 4 Section 301 tariffs due to take effect Sept. 1 on up to $300 billion worth of Chinese imports “would have a much larger impact on the U.S. tech sector” than the previous three rounds of 25 percent duties, an Aug. 5 S&P Global Ratings report said. The List 4 tariffs would “significantly raise costs for manufacturers and prices for consumers,” much more so than the current tariffs, it said.

List 4 also would encompass “a broader scope of major tech products” that represent a higher proportion of overall U.S. information technology spending, S&P said. List 4 also includes “more finished goods, which are more expensive than intermediate goods and therefore subject to higher tariffs,” it said.

The impact from the existing tariffs “has so far been relatively muted for U.S. tech companies,” which have been able to “reallocate certain manufacturing activities to where there are existing facilities and skilled labor,” S&P said. Hard disk vendors Seagate and Western Digital shifted some of their China-based manufacturing “to their existing facilities in Thailand and other countries,” it said. Others “have been able to pass along the higher costs to customers without significantly affecting demand,” it said.

S&P thinks many tech companies “have already planned to invest in new manufacturing facilities in Southeast Asia, Mexico, and other regions to offset any business concerns as a result of rising U.S.-China trade tensions,” it said. But “we expect their ability to use the same playbook to mitigate the higher costs” of the List 4 tariffs “will be more difficult over the near term,” it said. “Complex” supply chains are “well established” in China, “with parts and components suppliers concentrated there and skilled labor trained over many years,” it said.