China Tariffs in the Real World

China Tariffs in the Real World

If you’re wondering how tariffs imposed on goods imported from China are affecting consumer electronics-related goods, here’s one example.

Connecticut-based AV-furniture maker Salamander Designs recently issued this notice to its dealers:

On September 24, 2018 the government imposed a tax tariff on all goods imported from China, potentially increasing costs by 10% before climbing to 25% on January 1, 2019. Since 95% of Salamander products are made in the USA, Salamander customers will only face cost increases for the import line of AV Basics Seating and AV Basics Cabinets. We would like to keep up the increasing sales momentum of our AV Basics line and only increase our customer’s cost by 5%.

The 5% tax tariff will appear as a line charge on invoices starting October 10, 2018. For any questions regarding the tax tariff charge, please contact our sales department.

In a recent interview with Dealerscope, Sage Chandler, vice president for international trade at the Consumer Technology Association (CTA), called the potential impact of the tariffs on consumer tech products “very wide ranging.”

The first two tariff lists Trump Administration issued earlier this year were focused largely on components used in the manufacture of electronics products with little impact on consumer-facing goods, Chandler said, noting that the Office of the U.S. Trade Representative had planned to include TVs but backed off at the last minute following strenuous objections by the CTA.

But the most recent tariff list, which imposes a 10% tariff on $200 billion worth of Chinese goods that will rise to 25% on January 1, “will have a serious impact on the entire ecosystem of the Internet of Things (IoT),” Chandler said. The list includes things like servers, modems, and routers and had also included smart speakers, wireless earbuds, and wireless headphones, which were removed after the CTA and others expressed concern about the impact tariffs would have on the sale of these products. Combined revenue from just these categories adds up to $59 billion at the wholesale level.

A new CTA study of connected devices from China found that pricing on some of those devices could increase from 8.5 to 22% but Chandler said retailers probably won’t absorb all of the increases so the retail price of those products would rise between 3.2 and 6.2 percent, which equates to American consumers paying between $1.6 and 3.2 billion more for connected devices. Chandler added that tariffs have a particularly negative impact on the ability of startups and small companies to invest in the development of new products.

“We never want to wish a [U.S.] policy failure because it means so much devastation to so many and I hope it doesn’t get to that…but I could see it going that way, unfortunately,” Chandler said. “But I also like to think that [the Administration’s] negotiations will work and this will all be behind us very soon and that the tariffs can be lifted.

“It’s a global supply chain in this globally-interconnected world and you see that in no other sector better than in technology where bright ideas are born in one space and little pieces come from others,” Chandler continued. “At the end of the day, tariffs can really end up stifling that supply chain.”

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