Story is updated Wednesday with 84% retaliatory tariffs announced by China.
President Trump continues apace with his global tariff campaign, hiking the total tax on imports from China to the US to 104% starting Wednesday-- much to the distress of the electronics industry.
“With a 104% tariff, the potential impact is much higher and lopsided on goods that rely on electronics,” said Shawn DuBravac, chief economist at IPC, a global electronics association of 3,200 members. He spoke in an interview with Fierce Electronics late Tuesday.
Trump raised an earlier 54% tariff on Chinese goods by another 50% in response to China’s decision to counter Trump’s earlier reciprocal tariff move with its own 34% tariff on US goods delivered to China. Chinese officials have called Trump’s actions “blackmail,” while Trump appointees argued new tariffs on various countries have already raised billions for the US Treasury. UPDATE: China on Wednesday announced retaliatory tariffs of 84% on imports of US goods, adding to the growing trade war between the two largest economies.
Electronics companies will see profound impact from tariffs
The impact of tariffs on electronics companies will be profound, as well as the prices paid by businesses and consumers. Companies accepting electronics from China, Vietnam, Taiwan and other Asian countries where many components are often made cannot absorb the full cost of tariff increase on goods and will have to pass at least some of the cost to customers, DuBravac said.
“Price increases to end customers are inevitable with a 50% [added] tariff,” he said. “That amount is larger than the profit margin on them. Companies might shave a little bit here and there and some products will not see an immediate price impact. “
If the tariffs become permanent, there will structural changes to how manufacturers, assemblers and others source parts.
“Manufacturers have to presume these tariffs are permanent,” he advised. “Now there is uncertainty, but at some point they have to make commitments and make them on what’s best. A lot of people are hoping the tariffs get negotiated down or away, but it’s hard to make that bet.”
IPC surveys of members show hiring freezes, worries over supplier contracts
IPC has been studying proposed tariffs for months, and surveys hundreds of its members every month on their attitudes and actions in response to tariff proposals. In March, more than 60% of electronics manufacturers said they are considering renegotiating their supplier contracts, while 31% said they have already invested in automation or optimization software and procedures to counter the impact of tariffs. A total of 18% said they have implanted a hiring freeze, while another 36% said they are considering doing so.
In a carefully-worded statement on April 2, when Trump announced 10% tariffs on 180 countries, IPC said it welcomed President Trump’s commitment to strengthening American manufacturing, but added, “tariffs will not achieve this goal.”
Decades of globalization in electronics affect opinions about tariffs
Many economists have noted that using tariffs to persuade corporations to build manufacturing in the US will take years, if not decades, to reverse five decades of globalization of the electronics trade. Globalization of electronics started out of a desire to find the best products at the lowest cost no matter where they are, economists have said.
“Our members and all the electronics industry like a globalized market,” DuBravac said. “They are so reliant on it and it’s for the best of everyone. With the complexity of electronics like a smartphone, it should amaze us every day. It’s all reliant on the best of industry coming together. They get economies of scale. You can make one phone and sell it globally and it and really drive down costs that are passed on to consumers. Electronics makers broadly favor a global marketplace where they can source what they need globally. Yes, there is motivation by US companies to produce in the US for US [buyers] while still sourcing things globally. You want the best image sensors you can get regardless of who built it.”
With tariffs on electronics components, it will be immensely difficult for companies to assess their ultimate tax. “There are hundreds of thousands of inputs and you have to figure out where every little thing is coming from,” he said.
A Trump administration executive order on April 2 removes the deminimus exemption from tariffs on goods from China and Hong Kong starting May 2. The exemption has previously helped sensors manufacturers and others making or assembling components that are relatively low cost. The current exemption from tariffs sets the retail value at items up to $800, which will be eliminated in May.
How prices will rise under reciprocal tariffs by President Trump
IPC said reciprocal tariffs announced April 2 by President Trump could force consumer prices up by 48% on laptops, 49% on smartphones and 50% on video game consoles. For materials, parts and components critical to manufacturing electronics for businesses, prices potentially could increase 30% to 50%. These increases would affect printed circuit boards, PCB assemblies, wire harness/connectors and laminate and chemicals.
Motor vehicle electrical and electronics equipment could increase 13% to 25%. The US imported roughly $29 billion in 2024, with 52% from Mexico and nearly 2% from Canada. With 25% tariffs, costs could got up from nearly $4 billion to $7.3 billion.
If prices rise 50%, demand is also expected to fall for the affected products, by 40% to 70%, IPC said.
Tariffs as a negotiating tool?
Market observers have said the tariffs could be a negotiating tool on Trump’s behalf to encourage countries to drop or reduce their tariffs, as Israel has announced it will do, but Trump advisors including Peter Navarro have also said the tariffs are primarily designed to induce manufacturers to build operations in the US. Trump aides on Tuesday said the White House is in discussion with dozens of countries over ending tariffs. Trump has repeatedly said the tariffs are also meant to reduce the flow of fentanyl from Mexico, Canada and China.
DuBravac noted that Trump in his first term initiated tariffs that have motivated some companies to decouple operations from China. The result was that smartphone production started to move to India, where 12% of smartphones were manufactured in 2024. He estimates India’s production of smartphones will grow to 20% in 2025. Other countries benefited from decoupling tariffs, including Mexico, he said.
“If you look at all that, decoupling was broadly successful,” he said.
Big tariff hits on Apple, Nvidia, notes analyst Moorhead
Patrick Moorhead, chief analyst at Moor Insights & Strategy, said Apple has been a prominent example of decoupling from China, where most of its manufacturing remains and is likely about 90% of Apple's product revenue. It could take Apple about five years to move meaningful volume of its production to India, which current has 34% tariffs, he wrote in a social post on X.
"Apple has to be the worst off tech company regarding tariff threats," Moorhead wrote.
"Nvidia full systems, trays could get hit hard," he added. "Nvidia sells full systems, trays and semis [with] full systems and trays primarily made in Taiwan and get hit full with the full weight of tariffs. HGX-form factor GPUs, for example, are argued to be semiconductors and could be sent to Mexico, put in a server and wouldn't be tariffed [because Mexico is currently not tariffed with the USMCA trade agreement exclusion.] An Nvidia switch would get hit, but its chips head to Mexico to manufacture a switch? No. But there aren't many of those. Nvidia could have a lot of exposure here unless they move more of their own AI server manufacturing to Mexico. Calling a server a chip or a chip a server might be problematic with authorities down the road."
Moorhead noted that most notebooks are manufactured in China and will get hit hard by the "full force of the tariffs." ODMs in Mexico don't have the capabilities yet for laptops in Mexico. USMCA benefits desktop computers where meaningful conversion is done in Mexico, he said.
"All bets are off for hyperscale racks and desktop benefits if semis get tariffed," he said. President Trump has promised to tariff semiconductors in coming weeks.
Moorhead said companies making computer-related hardware are modeling two scenarios for cost increases on infrastructure if semis ultimately get hit and and the tariff impact on notebooks. One scenario is that demand declines and the other that the company would lock in price and despecify the configuration with lower configurations.
One bright spot of the tariffs: services and software are not subject to tariffs, Moorhead noted.
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