On August 7th, the office of the United States Trade Representative (USTR) released the second list of $16 billion worth of Chinese goods that will be imposed a 25% additional tariff. The new tariff list of 279 additional items includes major technology categories such as semiconductors, flash blocks, integrated circuit and other key components make them. The consumer goods prices including headsets, speakers, high-tech lighting and Internet services could all rise.
The next round of tariffs will impose a 10% tariff on another $200 billion of Chinese imports, including chips for consumer electronics. Almost all accessories for mobile phones will be affected. Apple, Google, Microsoft and other major technology companies have such diverse product lines and strong capital, they can only absorb the extra costs caused by tariffs, rather than pass them on to consumers. Even the richest companies usually shoulder a long-term tax, such as tariffs, before raising prices. But these prices will eventually hit consumers. However, under the pressure of tariffs, some small and medium-sized companies, have to start charging more to retailers. So at the end of the day the consumers will pay the piper.
Tariffs could also hit consumers who are upgrading to smart home products, such as Internet-connected speakers, security cameras, appliances, lighting and locks that can be controlled by smartphone or voice commands. If you have a house with any level of intelligence, you will be affected by these tariffs. Modems and routers for internet services are also on the next tariff list. Tariffs may have a domino effect that could increase internet service prices by 10% to 20%.
Since 1990, the share of U.S. workers employed by small companies has increased year after year, contributing a lot to the employment rate in the United States. Nowadays, under the huge waves of trade wars, many of them are precarious. Indeed, a recent study from Consumer Technology Association (CTA) showed that the current $50 billion in duties, coupled with retaliation by China, will reduce the U.S. gross domestic product by nearly $3 billion and lead to four job losses for every job gained. Gary Shapiro, the president and CEO of CTA said, “And the economic damage will be even worse if the White House adds another $200 billion in products to the list, and China continues to retaliate.”
If the purpose of Trump is to stop China’s “Made in China 2025” plan, then there is no doubt that he will fail. On the contrary, the behavior of the United States will only strengthen Chinese leaders’ determination to encourage innovation and gain technological superiority, as they understand that it is impossible to rely on others and the behaviors of the United States are extremely hostile.