As reported by the BBC, the United States is set to impose a 25% tariff on over 800 categories of Chinese goods. The tariffs are due to come into effect in three weeks, on July 6th. Thousands of different products are covered under this new tariff, and by every account, electronic designers will be hit hard. Your BOM cost just increased by 25%.
The reason for this tariff is laid out in a report (PDF) from the Office of the United States Trade Representative. In short, this tariff is retaliation for the Chinese government subsidizing businesses to steal market share and as punishment for stealing IP. As for what products will now receive the 25% tariff, a partial list is available here (PDF). The most interesting product, by far, is nuclear reactors. This is a very specific list; one line item is, ‘multiphase AC motors, with an output exceeding 746 Watts but not exceeding 750 Watts’.
Of importance to Hackaday readers is the list of electronic components covered by the new tariff. Tantalum capacitors are covered, as are ceramic caps. Metal oxide resistors are covered. LEDs, integrated circuits including processors, controllers, and memories, and printed circuit assemblies are covered under this tariff. In short, nearly every bit that goes into anything electronic is covered.
This will hurt all electronics manufacturers in the United States. For a quick example, I’m working on a project using half a million LEDs. I bought these LEDs (120 reels) two months ago for a few thousand dollars. This was a fantastic buy; half a million of the cheapest LEDs I could find on Mouser would cost seventeen thousand dollars. Sourcing from China saved thousands, and if I were to do this again, I may be hit with a 25% tariff. Of course; the price on the parts from Mouser will also go up — Kingbright LEDs are also made in China. Right now, I have $3000 worth of ESP-12e modules sitting on my desk. If I bought these three weeks from now, these reels of WiFi modules would cost $3750.
There are stories of a few low-volume manufacturers based in the United States getting around customs and import duties. One of these stories involves the inexplicable use of the boxes Beats headphones come in. But (proper) electronics manufacturing isn’t usually done by simply throwing money at random people in China or committing customs fraud. These tariffs will hit US-based electronics manufacturers hard, and the margins on electronics may not be high enough to absorb a 25% increase in the cost of materials.
Electronics made in America just got 25% more expensive to produce.
So someone please correct me, but this only applies to China and not Taiwan? So in fact not all goods through Foxconn and certainly not TSMC are affected? (In fact, the trade report complains about Chinese companies poaching expertise from TSMC)
Anywho, I’m going to confirm a few things in the comments. 25% is enough to make goods from China more expensive, but still not more expensive than US manufacturing, which has far steeper short run manufacturing costs and still more expensive and difficult logistics when most components are manufactured outside of China in Asia. I actively purchase quite a few things for work from China (small business volumes) and I don’t think there’s anything that we’d start buying from the US in the short or medium term even with the 25% tariff. So this basically turns into a tax on the poor who can’t afford higher quality goods and small businesses that do not have the volumes to avoid paying the 25%.
Someone mentioned injection molds needing to be redone from the Chinese manufacturers – I’ve had similar experience. But at the end of the day it’s still cheaper, especially if you have a US-based firm managing the offshore company. The first mold was not great – but only on the low end of four figures. We had to have it modified a few times, but it only barely broke $10k at the end of the day after at least three revisions, and that included whatever the broker was taking off the top. The “fast turn” US manufacturer we used for an earlier revision of the same part charged $20k+ for an earlier revision, before we knew better – and refused to make modifications to the mold, despite poor quality parts, without us paying anther $10k. This is a very specific case and I can’t go into more details, but I will say despite the lower initial quality (probably due to less experience from the operators) it’s still substantially cheaper to do many things in China at the end of the day.
I’ve also gotten this feeling that some of the stereotypes of poor quality are sort of inaccurate from a volume basis. I mean, what’s the highest quality phone you can buy out there? Probably an iPhone, and most of that is assembled in China. Most of us hardware hackers run into fake parts all of the time, but compared to all the phone and big electronics manufacturers, it’s probably a drop in the bucket. I get this feeling most of the legitimate businesses in China don’t have the time to deal with small companies, so most hobbyists or low volume companies are going to run into a disproportionately large amount of scammers. Point is, I would imagine over 99% of the total volume of goods coming in are legitimate and worthwhile – hardly sensible to put a 25% tax on that.
I have to admit, being a scientist, most of these estimates (other than my mold numbers) are arbitrary. It’d be nice if someone actually put a meaningful estimate out of x% business gained by US companies if tariffs were imposed by y%. I’m going to guess the 25% is largely punitive and not actually wealth maximizing.
tl;dr, especially in short runs, things in the US are really more like 10x more expensive, and 1.25x the cost of things in China is equivalent to a huge tax on the poor and small businesses. I agree that there are serious issues with IP in China, especially for the US, but
Macroeconomics is complex, and is difficult to interpret consistent estimates. However, most use _independent_ IMF style accounting reviews for Debt-to-GDP Ratio estimates as the standard. Note, countries (specifically intelligence organizations) will sometimes try to BS this number to game other economies (USA was bankrupt at >103% in 2017 and told everyone it was $1tr in US bonds it is probably taking a >7% valuation loss with the tariff.
Russia 34% *Don’t tell them we know their piss is yellow
United States 82.268% *this number should improve this year, but probably is worse due to CIA bias established in 2017 reports
Basically, the numbers show America briefly went Bankrupt (>100% debt) a few times since the 2017 recession
https://en.wikipedia.org/wiki/Debt-to-GDP_ratio
https://en.wikipedia.org/wiki/List_of_countries_by_public_debt
The president got greedy trying to accelerate siphoning debt into trading partners, and set off the Renminbi/US-dollar currency debasement alarms on the exchanges for every trading partner. I often wonder why the US aren’t bothering the people with actual wealth accumulation:
United Arab Emirates -79.486%
Saudi Arabia -7.723%
Norway -90.469%
Invest in bitcoin, as surely it is worthless — unlike your life savings, which may be worth less the nothing.
At least we can still LOL
;-)
I understand you so perfectly, I also in school had problems with macroeconomics, it seems to me a difficult subject that should not be imposed on every schoolchild, for me it was saving this source https://papersowl.com/examples/macroeconomics/ because there I found answers to many questions that were not clear to me, if you also have problems with it then I recommend you to read!
Chinas loss is INdia’s gain.. Did you know apple iPhone 5 series and 6 series manufacturing has started in India.
there’s a lot of good discussion going on here, I like that
but it’s just too early to tell which way this tree’ll fall
Notice that our economy has moved as futurists have predicted from less manufacturing to more intellectual property (and yes, programming is IP). One makes some, one licenses some. It does take a strong educational system though.
It’s a tax.
Yep, but all the Republicans that were against big government don’t seem to mind big government interferring with what people buy here.
I for one do not mind paying 25% more. I have watched the systematic rape and pillage of American manufacturing for far longer than I care to. If we can strat the process of rebuilding our industries by imposing tariffs, so be it, it is the hard choice that no one else has had the testicular fortitude to do until now. That being said I am no Trump fan, I think he is an arrogant buffoon. but he does have this right. If you think any of our so called allies in Canada or Europe will supply us unconditionally with all of the raw materials(steel,aluminum,alloys ,precious metals) we would need to fight off Russia , then you better start learning to speak Russian. I spent enough time in the military watching what they do to tell you these bastards aren’t kidding around. Why do you think China has been stealing technology and most particularly MILITARY TECHNOLOGY for so long, it isnt for the benevolent use of it’s citizenry! I don’t mind the monetary cost of our freedoms , the toll that has to be taken in flesh it what will kill our souls.
As a consumer what I’m willing to pay doesn’t necessarily have to track the increase in tariffs. Worse case is I pay more than the increase based on the perception of limited supply and consumers are usually bad at math. The other end is that a lower profit might be acceptable if it turns out consumers aren’t willing to pay the entire increase in price.
What isn’t clear to me is if some components are more expensive but other components are the same or cheaper in the US. The plastic housing for your gizmo is probably no different in cost as the US still manufactures a lot of plastics and the process is very automated so labor costs aren’t quite as significant as it is for electronics.
Rape and pillage? The world used China as its cheap labor producer and now wonders why theres all the industry. Has nothing to do with pillage, its about the greed of the customers which now takes its toll. Europe is an ally of the US, but since it will never downsize its army because of the military-industrial complex, everyone in Europe just went with it and kept the military spending low.
So, if components are on the list, but you are buying your board fully assembled, do you get assessed for the parts, or is the assembled board now a new thing that is not assessed because it is not in the list?
Since the United States doesn’t manufacture much of anything in the way of consumer electronics anymore there most likely will not be any increase in the cost of electronics when the price of the components increases.
The list of referenced tariff codes does not include any integrated circuits (tariff codes 8542*). So talk of IC fabs here or there does not seem relevant.
Update: The 8542* codes for integrated circuits are in a “second set” of codes that are still under consideration, but will not be included in the July 6 enforcement action.
Just got some pricing back from Kemet: CM-Power-Inductor was EUR 4,57 and now is EUR 10,59. Note that the time frame between orders was only 3 months. This US company is breaking itself down. THAT IS WHY all electronics manufacturing go up by 25%, because US manufacturers are f*cking up with their price strategy. Why? All are stock driven. With this stupid business model I assure you that we all have to learn to eat rice between now and 10 years. Yes, I am angry.