The Trump-era tariffs on PC parts made in China, including graphics cards, will return in January unless the Biden administration acts. Otherwise, brace for price increases.
In March, the White House granted exclusions on the Trump-era tariffs, which previously imposed a 25% duty on many electronics manufactured in China, such as motherboards and desktop cases. The decision helped restore some price normality in the electronics market amid high inflation in the US. But those exclusions were only temporary, and are set to expire on Dec. 31.
The looming expiration date has caused industry groups to urge the Office of the US Trade Representative (USTR) to extend the exclusions, or scrap the Trump-era tariffs altogether. Americans for Free Trade has even warned that companies are already planning for price hikes due to the Biden administration’s inaction.
“Because American businesses must make supply chain and sourcing decisions many months in advance, the uncertainty created by USTR’s inaction compels our companies to incorporate 25 percent price increases into product lines that may soon be without a Section 301 tariff exclusion,” the group told the USTR in October.
The Consumer Technology Association (CTA), which counts AMD, Nvidia, and HP as members, has also been lobbying USTR to make an early decision on extending the tariff exclusions.
“We’ve clearly stated the tariffs have not benefited our industry,” said Ed Brzytwa, VP of international trade for CTA, who described the tariffs as a tax on consumers and US companies.
In July, CTA published a report, which argued the Trump-era tariffs have failed to spur job creation or investments in US manufacturing. Instead, some companies decided to move their production to other places such as Vietnam, Taiwan, or Mexico. But many have kept their manufacturing in China.
“So the tariffs, from our perspective, are no longer motivating companies to leave China,” Brzytwa said. “Because the companies have said I would rather pay the tariff and have the certainty of working with the supplier that we’ve worked with for decades, than changing my supply-chain and taking the risk of moving to another market, especially during a pandemic.”
So far, the USTR has remained mum on whether it’ll extend the exclusions for Chinese-made PC parts. "I don’t have any updates to share at this time regarding those exclusions," a spokesperson for the office said. But last month, the agency did extend exclusions for “COVID-related products,” although only for an additional three months.
In addition, the USTR is conducting a four-year review of the effectiveness of the Trump-era tariffs to stop China’s unfair trade practices. This includes looking at whether the US should change its approach on imposing the tariffs. But it remains unclear when the USTR will make any major decision on the tariffs, or one at all.
Brzytwa declined to comment on how the return of the tariffs might affect a company’s business plans. However, he said: “The uncertainty around the decision-making [from USTR] is really damaging to business interests, and ultimately that means higher costs for consumers.”
Abolishing the Trump-era tariffs could help the Biden administration battle the ongoing inflation woes facing the US economy. But there are indications that US Trade Representative Katherine Tai wants to keep the tariffs in place. In June, she told a Congressional subcommittee she views the tariffs as “a significant piece of leverage” in the US’s trade relation with China. “And a trade negotiator never walks away from leverage,” she said.
Nvidia, AMD, and Intel didn’t respond to a request for comment. But a year ago, Nvidia told the USTR it was still reliant on Chinese manufacturing to churn out graphics cards. “Efforts to create new capacity in countries that presently do not manufacture such products (such as the US and Vietnam) were unsuccessful and were severely hampered by the fallout from COVID-19,” the company wrote.
Meanwhile, GPU vendor Zotac told USTR: “China remains...the major manufacturing base of video graphics cards and personal computers in the industry. The major reason is due to the upstream supply chain remaining mostly in China.”