If you were upset about miners impacting demand for the already-short-in-supply graphics cards, brace yourself for today's news: China tariff exemptions that expired with the new year (via New York Times) mean that, among other products, GPU pricing will increase significantly (as noted on Reddit).
So far, Asus has already confirmed it needs to raise GPU and motherboard prices due to logistical complications and import tariffs, and other GPU vendors, including Zotac, MSI, EVGA, and Gigabyte, are likely to follow suit, or are already doing so silently. In fact, pricing on several families of third-party GPUs from those GPU makers has gone up in the last few days.
Juan Jose Guerrero III, Technical Marketing Manager at Asus, explained the following:
"Update regarding MSRP pricing for ASUS components in 2021.
This update applies to graphics cards and motherboards*
We have an announcement in regards to MSRP price changes that are effective in early 2021 for our award-winning series of graphic cards and motherboards. Our new MSRP reflects increases in cost for components. operating costs, and logistical activities plus a continuation of import tariffs. We worked closely with our supply and logistic partners to minimize price increases. ASUS greatly appreciates your continued business and support as we navigate through this time of unprecedented market change.
*additional models may see an increase as we moved further into Q1."
We have emailed Nvidia to ask about the situation and what this means for MSRP pricing but have yet to hear back.
Tariffs Range from 7.5% to 25%, and More Than Just GPUs Will Be Affected
Of course, this doesn't come as a huge surprise, and other components are likely to be affected, too, including motherboards, SSDs, power supplies (which are also still in short supply), cases, and more. However, the catch with many of these components is that they aren't as expensive to begin with, weren't exempt in the first place, nor are they in as high demand as GPUs are, so the price increases won't be as prominent on a per-component basis. That said, you'll undoubtedly feel the price difference well when you tally up the total costs of building a fully new system.
The expiring tariff exclusions result from import tariffs instated by the Trump administration in 2018, but following pushback from a handful of players, specific goods fell under exemptions. The taxation rate ranges anywhere between 7.5 percent and 25 percent, so depending on which pricing bracket GPUs fall in, the price increases for consumers can be significant.
The Perfect Scapegoat?
Naturally, supply issues in GPU land don't help, and while tariffs certainly play a part, there's more going on than just import taxes. With COVID, international shipping costs have risen significantly due to reduced international passenger transport, and labor costs have also increased due to other logistical expenses, like employee shortages due to lockdowns and sick leave.
Many will opine that the tariffs situation could also be used as a scapegoat to increase MSRPs in the midst of the PC hardware shortage, especially when you consider that GPU prices are on the rise globally and not only in the US.
In the short run, Q1 and Q2 are likely to be rough quarters for hardware prices. The goal of these tariffs is to increase production in the US and increase local employment and decrease reliance on imported goods. Manufacturers could ship almost-finished products to the US and finish assembly and packaging locally to attempt to defray the impact of these steep import taxes, but this would take years and be more expensive than tariff-exempt imports, and it isn't a panacea. The catch is, most of the components in the supply chain are also impacted by the tariffs, which are applied as those components are shipped out of China. Because the tariffs only apply to goods shipped from China to the US, companies are more likely to reroute manufacturing to other low-cost labor countries to avoid the fees.
(bonus points for anyone who catches the reference)
Integrated graphics or console anyone?
Anyway, it is a nice thing to tax imported goods, if there is a push for local production. Brazil does tax a lot (35%), but there is no push for local, so it's bad. I believe the US is smart enough to get some factories to the country, which should get prices back to where they should.
I wonder if things get worse, if they will still keep the MSRP prices in 2021...
Did Asus not see the tariffs coming, or did they seriously mess something up behind the scenes for their other costs to suddenly rise? I think this is probably going to increase their margins, not just pass-on the cost.
Asus might be willing to tell investors that they are too incompetent to bake known tariffs into the MSRP, but there's no way Nvidia was too dumb to plan one month ahead with their base MSRP. Otherwise, somebody else explain why they decided that their "midrange" GPUs should cost $400-$500 instead of $200-$300.