Trump’s Boomerang – Section 301 tariffs on information technology products

In accordance with the direction of the President, the U.S. Trade Representative proposes a modification of the action being taken in this Section 301 investigation of the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation. The proposed modification is to take further action in the form of an additional ad valorem duty of up to 25 percent on products of China with an annual trade value of approximately $300 billion.

Intel, HP, Microsoft and Dell are joining forces to oppose President Donald Trump’s proposed tariffs:

U.S. laptop manufacturers currently rely on Chinese suppliers to satisfy U.S. demand for laptop products. China accounts for over 90% of total laptop and tablet imports. As a result, the proposed tariffs threaten to substantially increase the cost of laptops in the United States.
A recent study commissioned by the Consumer Technology Association estimates that U.S. prices for laptops and tablets will rise by at least 19 percent (i.e., around $120 for the average retail price of a laptop) if the proposed tariffs are implemented.

Higher laptop prices for our customers, including cost-conscious small businesses, families, and students, and even including the U.S. Government, will diminish demand for laptops, which will threaten to impair productivity growth for the U.S. economy as a whole.

At the same time, tariffs would provide a windfall to manufacturers based outside the United States. Because foreign competitors are less dependent on U.S. sales, they would be less severely impacted by new tariffs and would be well-positioned to continue investing in R&D. More generally, economic models suggest that Section 301 tariffs on information technology products will encourage trade diversion to countries other than the United States and China. Consistent with these predictions, laptop and component producers located outside of the United States and China stand to benefit from additional Section 301 tariffs by taking valuable market share away from U.S. manufacturers.

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