How Will The Chinese Tariffs Affect Technology Prices?

The tariff’s that were put into place in September have caused some technology suppliers to increase prices by 10%. Now with tariffs on Chinese imports going into effect on January 1, 2019, you could face another increase in prices to the tune of 25%.

What Are The Specifics Of The New Chinese Tariffs Policy?

According to the United States Trade Representative (USTR), about $200 billion of imports from China will be subject to the additional tariffs.

Unfortunately, China isn’t changing its policies of unfair acquisition of U.S. technology and intellectual property. Instead, of doing this, they responded to the United States’ tariff action by taking further steps to harm U.S. workers and businesses.

Because of this, the President directed the USTR to increase the level of trade covered by the additional duties to 25% in order to eliminate China’s unfair policies.  The Administration will continue to encourage China to promote fair trade with the United States. We hope this will happen before January 1st.

What Happens If The Chinese Don’t Decide To Change Their Unfair Policies?

The Consumer Technology Association (CTA) estimates that a 25% tariff on printed circuit board assemblies (a critical component for the servers that power data centers) would increase in price by more than 6 percent and reduce consumption by nearly 12 percent in 2019.

This will also affect connected devices like routers, modems, and products like the Internet of Things (IoT)-based devices. This means that businesses will be forced to choose between forgoing these technology purchases or paying the price and cutting back on other things like new projects or hiring more employees.

Here’s a list of products that will be affected by the 25% increase in Chinese tariffs. (from Data Center Dynamics)

“nesoi” means Not Elsewhere Specified Or Indicated

• Fans used for cooling microprocessors, telecommunications equipment, or computers
• Power supplies suitable for physical incorporation into automatic data processing machines
• Power supplies for automatic data processing (ADP) machines or units
• Static converters (for example, rectifiers) for telecommunication apparatus
• Other inductors for power supplies for ADP machines… or for telecommunication apparatus
• Printed circuit assemblies of power supplies for automatic data processing machines
• Nickel‐iron storage batteries
• Ignition magnetos, magneto‐dynamos, and magnetic flywheels
• Generators nesoi, of a kind used in conjunction with spark‐ignition or compression‐ignition internal‐combustion engines

Servers and storage:

• “Processing units” [defined as servers by trade body TechNet]
• ADP magnetic disk drive storage units, disk dia. of 21 cm, w/o read‐write unit; read‐write units; all not entered with the rest of a system
• ADP magnetic disk drive storage units, disk dia. ov 21 cm: for incorp. into ADP machines or units, not entered with the rest of a system
• ADP magnetic disk drive storage units, disk dia. n/ov 21 cm, nesoi, not entered with the rest of a system
• Control or adapter units for automatic data processing machines not entered with rest of a system
• Unit suitable for physical incorporation into an automatic data processing machine or unit thereof, not entered with the rest of a system, nesoi
• Other units of automatic data processing machines, not entered with the rest of a system, nesoi
• Magnetic or optical readers, nesoi; machines for transcribing data on data media in coded form and machines for processing such data, nesoi
• Recorded optical media, for reproducing representations of instructions, data, sound, & image, recorded machine readable binary form, for ADP

Semiconductors:

• Silicon-containing by weight not less than 99.99 percent of silicon
• Quartz reactor tubes and holders designed for insertion into diffusion and oxidation furnaces for semiconductor wafer production, nesoi
• Gold and other precious metals

Misc:

• Lightning arrestors, voltage limiters and surge suppressors, for a voltage exceeding 1,000 V
• Insulated electric conductors nesoi, used for telecommunications, for a voltage not exceeding 1,000 V, fitted with connectors
• Machines for the reception, conversion, and transmission or regeneration of voice, images, or other data, including switching and routing apparatus
• Printed circuit assemblies CTA estimates this tariff could reduce in their purchaser spending power of affected companies on the order of $900 million (10 percent tariff) to $1.8 billion (25 percent tariff)]
• Coaxial cables
• Other apparatus for transmission or reception of voice, images, or other data, including for communication in a wired or wireless network

Smartwatches and Bluetooth devices were taken off this list. Cisco, Dell, HPE and Juniper Networks all pressed the government to take networking and server equipment off the list, but they weren’t successful.

For those of you who are interested, this is the full list of items affected by the tariffs.

Even The Cloud Will Be Affected

The Information Technology and Innovation Foundation (ITIF) warns that Americans will be impacted by the tariffs for inputs to cloud computing and data services. They say that raising the cost of networking products would impede the development and adoption of cloud-based services and infrastructure. As important as cloud computing has become, this could have far-reaching effects.

As January 1, 2019, is fast approaching now is the time to seriously consider purchasing the technology you’ll need before the additional tariffs go into effect. Your projects will need to be put into motion by November 26^th (the Monday after Thanksgiving). The equipment portion of the project will need to be ordered, and the labor started before the end of the year.

Have questions? Contact Colorado Computer Support at (719) 355-2440 or blake@coloradosupport.com.