CES 2022 Speakers Call Section 301 Tariffs ‘Anti-Innovation’

SVS CEO Gary Yacoubian wants people to imagine waking up one morning, and finding "your cost of goods just went up by 15%” overnight, he told a CES 2022 trade and supply chain workshop Wednesday on the Section 301 tariffs on finished speakers and subwoofers that SVS imports from China. Speakers and subwoofers with List 4A tariff exposure were originally dutied at 10% when they took effect in September 2019 (see 1908160014), and were later raised to 15%, then cut to 7.5% with the February 2020 enactment of the phase one trade deal with China.

The Trump administration’s “narrative” for imposing the tariffs on Chinese imports “was that we were sort of going to take it to the other guys and make them pay” for their unfair trading practices, said Yacoubian, a former CTA chairman. “But the reality is, tariffs are anti-consumer.” Tariffs also are “anti-innovation,” he said. “So much innovation is done by smaller companies like mine.”

Another “false narrative” was that the tariffs would create U.S. jobs, said Yacoubian. Instead, “the tariffs created some jobs in Thailand, in Vietnam, in Singapore and Malaysia” when U.S. importers shifted sourcing to those countries from China to escape or mitigate their tariff exposure, he said.

Austere CEO Deena Ghazarian’s “biggest frustration” in launching her home theater accessories startup three years ago was the penalty “instantly being taxed on my business” when the Trump administration raised the List 3 tariffs to 25% on the HDMI cables and surge protectors her company imported from China, she said. Austere “was in the process of starting,” she said. “I hadn’t even shipped my first product, but I had cut all my deals with my partners, and had to walk into that relationship knowing that for one year I couldn’t even do anything about it.”

The funds Austere needed to divert to pay the List 3 tariffs were “significant for a little startup like me,” said Ghazarian. “That money was the money I wanted to use to continue to innovate, to continue to bring new things to market, to try to do something and differentiate. It honestly slowed us down.” Austere was able to thrive from the COVID-19 lockdowns that fueled surging consumer demand for home theater products and accessories, she said. But “the opportunity I had to innovate and really bring some new things that would have blossomed in the pandemic -- it actually stunted me from that growth because of this tariff war,” she said.

The recent supply chain bottlenecks forced Austere to become more “proactive” about how it moves products to consumers, said Ghazarian. “I’ve never been more creative in my life on the operations side as we have been in the last year.”

That creativity includes learning new ways of “how to be smart about where the goods came in,” said Ghazarian. Austere, based in Oregon, opened an East Coast facility, and “started going through a different port that I’ve never in my life been used to going through,” she said. The Port of Los Angeles “is where the lifeblood of everything I’ve ever worked on came through,” said Ghazarian, a former Monster executive. “That we took a risk and moved to a different side of the country” was a decision she hopes will be “helpful” to Austere in the long term, she said.

The federal government can be the tech industry’s “essential and strategic partner, enabler and collaborator,” said Robert Hoffman, Broadcom head-government affairs, and a former legislative director for then-Sen. Mike DeWine, R-Ohio. “We’re seeing it positively with the Chips Act, which was enacted last year without any funding,” said Hoffman. This Creating Helpful Incentives to Produce Semiconductors for America Act “started a conversation” about the government’s role in incentivizing private-sector U.S. semiconductor investment, he said. “Chips Act funding can turn conversation into action, and we’re hopeful that we can get Congress to approve that funding sometime early this year.”

Long-term continuity in federal policy toward the tech industry is needed, said Bill Rockwood, deputy legislative director to House Communications and Technology Subcommittee member Darren Soto, D-Fla. If Congress authorizes the billions of dollars in funding for the Chips Act, “we can’t take it back in four years” with a change in the White House, he said. “I don’t think these issues are partisan, but we need to be thoughtful on the front end.”