Tech companies received some good news and some bad news from the White House on Monday. The good news was that officials changed the list of items affected by tariffs on goods imported from China to exclude smartwatches and other Bluetooth devices. The bad news was that "network router-type products" were added to the list of affected products and that addition could have serious implications for businesses, an official told CNN.
Placing tariffs on wireless routers would raise costs for tech companies in several ways. Companies that sell wireless routers would be directly affected, for example, simply by virtue of their business. Yet even companies that don't sell routers would be affected because they need to use them for their existing infrastructure. Tech companies have to go online; making it more expensive to do so causes a clear financial problem.
U.S. tariffs on Chinese goods have steadily expanded to include more types of product over the last few months. The first wave affected tech companies by including various transistors, PCBs, displays, and other components used in many devices. It was expected to affect $34 billion worth of goods. An updated list was going to include certain wireless devices, like Bluetooth speakers, but those items have been spared for now.
A later update threatened the semiconductor market and raised the estimated value of tariffed goods to $200 billion. According to a statement from President Donald Trump, if the Chinese government "takes retaliatory action against our farmers or other industries" in response to the tariffs, another $267 billion worth of goods will be added to the list. Saying that's a big leap from $34 billion would be underselling it.
But that doesn't mean China won't respond to the Trump administration's tariffs. The Associated Press reported that the Chinese government announced a "tariff hike on $60B of U.S. products in response to Trump duty increase in technology dispute." That doesn't quite compare to the $200 billion targeted by U.S. tariffs, but it shows that if the Trump administration wants a trade war, China's willing to get its hands dirty as well.
The prospect of a trade war has tech companies on edge. Tariffs would make it more expensive to develop and release new products, and if those costs aren't passed on to consumers, a company will either have to watch its profit margins dwindle or stop making affected products entirely. That isn't a hypothetical--a boutique case maker called CaseLabs shut down in August, with its CEO claiming that tariffs helped raise their costs by 80 percent.
The Consumer Technology Association published a statement in response to Monday's announcement. The group questioned whether or not the tariffs are actually legal--it said "Congress has not given the president or the USTR a blank check to pursue a trade war"--and expressed its hope that the Trump administration will rethink the tariffs. Here's the part of the statement addressing the good and bad in the latest tariff news:
“We appreciate the Trump Administration removing consumer connected devices, the largest tariff code CTA identified in our USTR comments. Retaliatory tariffs, whether 10 percent or 25 percent, are bad policy. We are especially concerned about retaliatory tariffs on printed circuit assemblies, routers and networking equipment. They will stifle our global leadership in 5G, create an internet tax on businesses and cause uncertainty for companies."
Introducing tariffs on goods originating from China is unlikely to help American businesses or consumers. It could have the opposite effect: products could become more expensive, companies might stop making specific goods, and some people could lose their jobs as their employers scramble to cut the effects the costs imposed by these tariffs could have on their business.