Investors in Apple Inc, which still produces the vast majority of its iPhones and other devices in China, rejoiced late April 11, when Customs and Border Protection quietly announced guidance that smartphones, computers, and a handful of other tech goods would be spared from the most-punishing 125% tariffs inflicted on China (while still being subject to a 20% levy). Critics said the move reeked of cronyism, but the rollback seemed to reveal that someone in Trump’s camp recognised the vast damage these tariffs would do to American tech firms and consumers. iPhones are hardly the only devices the US relies on China for: Some 73% of all US smartphones come from there, as well as 79% of PC monitors and 66% of laptops.
But the relief appeared to be short-lived. Just 48 hours later, Commerce Secretary Howard Lutnick said in an interview that “this is not a permanent sort of exemption.” In a social media post, Trump added that “NOBODY is getting ‘off the hook’”, before adding, “there was no Tariff ‘exception’ announced on Friday”. Both emphasised that more duties were coming, specifically on semiconductors and the products they power. Rather than a permanent loophole, these electronics are just “moving to a different Tariff ‘bucket,’” the president said.
Even if temporary, the carve-outs cast doubt on Trump’s insistence that any tariffs will be paid for by foreign nations and not US businesses or consumers. Rolling back levies that he instigated indicates that either Trump recognises that they’re harmful to US companies or that Big Tech leaders have been able to buy his favour. The former suggests fundamental issues in America’s current trade policy; the latter would be a concerning signpost that businesses without White House influence should brace for outsized impact.
All this back-and-forth is stoking the inferno of uncertainty that makes it very difficult to do business. With major revisions to trade policy now rolling in by the hour, what may have made sense on Friday is out the window by Monday morning. This eventually risks choking US tech ambitions and innovation.
See also: Apple customers dash to stores to buy iPhones ahead of tariffs
One of the few constants is the Trump team’s repeated insistence that their goal is to bring tech manufacturing to the US. For the electronics exemption, Trump posted: “We need to make products in the United States.” Yet these moves only seem to discourage it further, putting higher costs on components compared to final products, such as exempt smartphones and computers.
Using tariffs won’t address the shortage of skilled workers or engineers who are abundant in China. And it’s also not as simple as moving a single factory, so US workers are the ones “screwing in little screws to make iPhones”.
The ecosystem of suppliers in Asia took decades to build. It is not economically viable to move iPhone production to the US, and recreating a comparable supply chain would take much longer than Trump’s four years. Given that business leaders don’t know if these policies will stick over the course of a weekend, some may choose to simply mitigate short-term pain and wait it out rather than spend tens of billions trying to please the president while receiving no long-term guarantees. At most, this process encourages business leaders to offer surface-level concessions rather than strategic reshoring. It’s time to try a different approach.
See also: Nvidia CEO says he was surprised that publicly-held quantum firms exist
Another constant is that this will result in China becoming even more self-reliant. Its tech industry has already been navigating years of export restrictions that have forced it to do more with less and spurred top-down support for broader tech goals. Silicon Valley firms that rely on Chinese suppliers will be hurt, but it’s telling that China didn’t even have to negotiate some sort of deal to gain these exemptions. The signs of defeat are piling up. — Bloomberg Opinion
