While investors continue to parse sweeping tariff proposals from the US and China, unveiled in rapid succession this week, some analysts are finding the fallout would not be catastrophic.
A report released Thursday found that levies on products targeted in both the Trump administration’s tariff list and China’s retaliatory one would have limited impact on the global tech supply chain. This, despite the US list’s targeting of electronics exports, which accounted for US$130 billion of the total US$600 billion in cross-border trade in 2016.
In fact, the US tariff proposal appears to be applied primarily to component products not often shipped directly to the US, according to the research from Goldman Sachs. The tariffs on consumer electronics categories make up a relatively small amount of sales for most tech companies. Similarly, the analysts point out, the China list also includes items that are either not high-volume tech products, or are often assembled in China directly, such as cars.
In order to limit the pain felt by the US consumer, end-use products, including smartphones, servers, and PCs, were conspicuously absent from the Trump administration’s initial list. Some items that are on the list, such as circuit boards and semiconductor devices, would generally be assembled as part of a product that may not be on the list.
Despite the limited scale of the overall impact, certain tech categories would be hit. Monitors and projectors are among the items that are on the list, though stipulations on types of these items make it unclear the precise impact it would have on specific companies. Certain types of storage could be hit by the US tariffs on their own, but excluded if assembled as part of a finished consumer product.
The report also pointed out that, while the US accounts for a much higher share of value-add semiconductor design – 40%, versus China’s 5% – China accounts for an estimated 80% of assembly. The Chinese consumer, meanwhile, accounts for 25% of both smartphone and PC consumption, globally. That is compared to between 12% and 15%, respectively, in the US.
For those companies that would be directly hit by the tariffs, the degree of impact depends on how easy it would be to shift manufacturing from China. There is potential for some firms with a balanced geographical footprint to benefit from tariffs.