BEIJING (Reuters) - Information technology products, from cellphones to personal computers, have largely escaped the latest salvo of U.S.-China trade measures despite accounting for a significant portion of bilateral trade.
The office of the U.S. Trade Representative (USTR) on Tuesday raised the stakes in a growing trade showdown with China, targeting 25 percent tariffs on some 1,300 industrial technology, transport and medical products.
China hit back within hours with its own threatened duties on U.S. imports including soybeans, planes, cars, whiskey and chemicals.
The U.S. proposed list of $50 billion in tariffs is aimed at forcing Beijing to address what Washington says is deeply entrenched theft of U.S. intellectual property and forced technology transfer from U.S. companies to Chinese competitors through initiatives such as the “Made in China 2025” plan.
But advanced information and communication technology (ICT) products, among China’s top priorities, were conspicuously absent from Trump’s tariffs list, giving both countries’ companies in the sector good reason to breathe sighs of relief.
“Just about every major ICT product was exempted,” one U.S. industry source said of the U.S. list. “They did target Made in China 2025, but with a caveat. They weren’t going to unduly harm the consumer.”
USTR said it developed the tariff targets using a computer algorithm designed to choose products that would inflict maximum pain on Chinese exporters but limit the damage to U.S. consumers.
The list got an initial scrub to remove products identified as likely to cause disruptions to the U.S. economy and those that needed to be excluded for legal reasons, with remaining products ranked based on impact to consumers.
Cellphones, laptops, PCs, servers, and telecoms equipment are all largely exempted under Trump’s plan, which still must undergo a public comment period of about two months before being finalised.
The Semiconductor Industry Association says U.S. companies have about half of global semiconductor market share, constituting the United States’ fourth ranked export behind aircraft, refined oil and automobiles.
UBS Securities has said that Chinese electronics and tech exports account for 43 percent of total exports to the United States.
But much of the value of that trade comes from U.S. semiconductors that are sent abroad for low value-added processing before finding their way back to U.S. consumers registered as U.S. imports.
If the U.S. government had slapped duties in such imports, they would have dealt a blow to one of the United States’ industrial pillars.
The Information Technology & Innovation Foundation (ITIF), a U.S. technology think tank whose board includes representatives from top companies such as Apple Inc AAPL.O, Amazon Inc AMZN.O, Cisco Systems CSCO.O, Google GOOGL.O, and Intel Corp INTC.O, said in a submission to the U.S. government during the tariff investigation that 10 percent duties levied on Chinese ICT imports would slow the growth of U.S. output by $163 billion over the next 10 years.
Another tech industry insider told Reuters: “It’s possible the reason is that the U.S. companies will be damaged by this and the government is taking that into account.”
Among tech products not exempted were magnetic hard drives and flat-panel television sets, and the U.S. duties were heavily focused on industrial manufactured goods, such as machines, robots, motors, valves, medical devices, and pharmaceuticals.
The tariffs are designed to change negotiating dynamics between China and the United States over trade and give Trump leverage to get concessions out of Beijing.
But Trump is also focused on his promise to voters to reinvigorate U.S. manufacturing jobs.
Jacob Parker, vice president of China operations at the U.S.-China Business Council, warned that any efforts by Trump to get U.S. companies to move production back home through tariffs could backfire, much as when President Barack Obama put tariffs on Chinese tyres only to see tyre imports from Indonesia and Taiwan surge.
“You could certainly see a focus on re-shoring operations. That’s not going to happen,” Parker said.
“If we stop importing a product from China, we’ll just import it from the next lowest cost producer, such as Korea or Vietnam or Malaysia, rather than make it in the U.S. and pay more for it.”
Reporting by Michael Martina and Cate Cadell; Editing by Alex Richardson
Our Standards: The Thomson Reuters Trust Principles.