The White House’s $250 billion in tariffs on Chinese imports will increase the cost of electronic components by 25%.
Before we dive into the issue in question, I need to make a something clear. I will moderate away any broad-brush political comments. Read the post, think about the issue, and feel free to thoughtfully discuss it. Anything short of thoughtful discussion isn’t helpful to anyone. (For what it’s worth, that extends beyond this site.)
What’s Going On
Electronics and manufacturing expert Andrew “bunnie” Huang published a lengthy analysis this weekend about how the $250 billion in tariffs on Chinese imports will harm educators, DIY creators, and American businesses that do assembly within the United States by slapping a 25% tax on a broad spectrum of electronics components.
“The new 25% tariffs announced by the USTR, set to go into effect on July 6th, are decidedly anti-Maker and ironically pro-offshoring. I’ve examined the tariff lists (List 1 and List 2), and it taxes the import of basic components, tools and sub-assemblies, while giving fully assembled goods a free pass. The USTR’s press release is careful to mention that the tariffs “do not include goods commonly purchased by American consumers such as cellular telephones or televisions.”
Think about it – big companies with the resources to organize thousands of overseas workers making TVs and cell phones will have their outsourced supply chains protected, but small companies that still assemble valuable goods from basic parts inside the US are about to see significant cost increases. Worse yet educators, already forced to work with a shoe-string budget, are going to return from their summer recess to find that basic parts, tools and components for use in the classroom are now significantly more expensive.”
Bunnie thoughtfully breaks down why these tariffs are ill-conceived because they fly in the face of their stated goal. Assembled electronics such as smartphones, televisions, and computers are all exempt from the tariff. The unassembled components that make up those devices are subject to the 25% price hike.
The incentive to pay Chinese manufacturing to build the entire product before shipping will get magnified, not reduced.
Tariffs & Escape Room Creators
Escape room creators who design and build their own games or hire American labor to create custom games will take a massive financial blow from these tariffs.
The tariffs hit the absolute necessities for custom technology creation. The list is lengthy, covering essentially all of the basics short of wood, paint, and construction hardware (update: screws & nails will be impacted by the steel tariff). If it’s related to the creation of electronics, it’s probably on the tariff list.
These items from List 1 are set to increase in price by 25% as of July 6th, 2018:
A broad range of items within the following categories are affected.I have simplified the lengthy list for easier reading. Read the List 1 on the USTR website for more thorough descriptions.
- soldering irons
- resistance measuring instruments
- circuit assemblies (like Arduino)
- photosensitive semiconductors
- mounted piezoelectric crystals
- insulated electric conductors
- touch screens without display capabilities
- power supply parts
- and many other items
These items from List 2 are under review for a 25% tariff:
- additional types of diodes
- additional electronic integrated circuits: processors and controllers, memories, amplifiers, other
- parts of electronic integrated circuits and microassemblies
- electric motors
- DC motors
- additional insulated electric conductors
- acrylic polymers
- monofilament plastics (for 3D printing)
- and many other items
The Net Effect
A 25% hike in electronic component prices will measurably increase build budgets. It will also raise the price associated with learning and experimentation.
If the finished goods you buy are made in the US, they too will have been subjected to these tariffs and will increase in price.
Build prices will go up.
Either budgets will inflate too or quality will drop accordingly. In general, Americans will be paying a lot more for a broad range of goods, so raising prices won’t necessarily be a great strategy to mitigate the losses on the business side.
If you can stock up on the parts that you need, you should try to do so before July 6th.
That being said, bigger companies than yours have been gobbling up everything that they can to improve their margins, so prices have gone up, especially in markets that have already been struggling to meet demand, such as capacitors.
It’s also possible that the things you need have already sold out.
Adjust Your Budgets
If you’re planning new games, you’ll need to revisit your budget. There’s no way around it.
List 2, which includes all manner of 3D printing and acrylic laser cutting materials, has not yet been ratified. The USTR reports that they will open this list up for public comment. When that opens up, I ask everyone to speak up.
The bigger the company, the more insulated they are from these tariffs. Massive manufacturing operations that already handle all assembly in China will be untouched by this policy. It’s the medium and small scale businesses, as well as individuals, who will bear the brunt of these new taxes.
Setting aside for a moment my personal belief that no one wins a trade war… when I stop and contrast the stated goal of these new tariffs — to harm Chinese businesses and boost American companies — with the harsh reality that it will make more sense to buy finished goods from China, I am at a loss for words.
Increasing the price of base-level components increases the cost of education, making it more expensive to learn the skills necessary to thrive in a technology-driven world.
Increasing the price of base-level components drives up the price of goods built in the United States.
Increasing the price of base-level components decreases the likelihood that a product will be built in the United States.
If we’re going to fire a gun, it shouldn’t be at our own foot.
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