On Tuesday, the Trump administration announced that it will delay the start of a new 10 percent import tax on certain Chinese products. The United States Trade Representative stated that the tariffs would go into effect on September 1.
However, the federal government will now wait until December 15 to tax a wide range of imported Chinese goods. The agency specified that the exempted goods include laptops, smartphones, video game consoles, computer monitors, and specific apparel.
Take a Breath
Earlier this month, President Trump declared that he’d enact a 10 percent tariff on $300 billion of Chinese goods on September 1. In response, the Chinese central bank revised the value of the yuan. The move sent shockwaves through the U.S stock markets. It eventually resulted in America’s five largest technology companies losing $162 billion in one day.
Though staggering, the tech sector’s historical one-day loss is indicative of a larger trend. Since the U.S.-China trade war began over a year ago, the American technology industry has struggled to cope. Chipmaker Micron slashed its workforce because of the conflict’s effect on its business. Meanwhile, Apple asked its suppliers to consider relocating their manufacturing facilities outside of China.
The majority of the U.S. console gaming industry also asked Washington to exclude its hardware from the tariffs. Microsoft, Nintendo, and Sony said that the new import taxes would devastate their profit margins, harm the retail gaming sector, and stifle innovation. The Trump administration never publicly responded to that request, but it did deny a similar plea from Apple CEO Tim Cook.
With the government’s delay, the tech sector now has a few months to prepare for a surge in material costs. However, though Washington is showing some flexibility regarding its tariffs, it remains rigid about another important aspect of the trade conflict: the ban on Huawei.
The Huawei Ban is Still in Effect
In May, the U.S. Department of Commerce put Chinese conglomerate Huawei on its Entity List. As a result, the agency now forbids American companies from doing business with Huawei without permission. In July, a host of tech industry leaders asked the President and the Commerce Department to begin issuing exemption licenses in earnest.
The executives made the request because Huawei was one of the largest international clients for many of their companies. For instance, Google licensed its Android operating system to the company for use on its many mobile devices.
Furthermore, the American semiconductor industry had a significant financial incentive to resume business with the Sino conglomerate. In 2018, Huawei spent $11 billion on U.S.-sourced components.
Though the Trump administration indicated that licenses would be forthcoming in a “timely” manner, the Commander-in-Chief subsequently reversed course. Due to an escalation in hostilities between China and America, the President took a firm stance against the global telecommunications company. Last Friday, Trump told reporters, “We’re not going to do business with Huawei.”
Interestingly, the President said that business with the firm might resume if a new trade deal is made. However, that development is unlikely to occur anytime soon. As such, the component industry may need to live with the loss of a significant source of revenue for the foreseeable future.