Phone and conversation: why the United States exempted electronics from duties

Donald Trump may continue to make concessions in his tariff policy, at least for the duration of the "transition period" if enterprises are ready to move production to the United States, experts interviewed by Izvestia believe. On April 11, the United States has already exempted electronics and smartphones from fees. This is due both to the risks of public discontent due to the potential increase in prices for phones and computers several times, and to lobbying by the largest tech giants. Their quotes have fallen by more than 20% over the past two weeks: investors expected that companies would have to undergo a large-scale restructuring of logistics and production, which would eventually lead to higher prices and lower sales. Izvestia looked into how the most serious trade wars in the last 100 years are flaring up and what the opponents' next steps might be.

Trump abolished duties on electronics and smartphones

The US administration has decided to exempt electronics from mutual duties, including smartphones, computers, laptops, hard drives, computer processors and chips. This was reported on April 11 by Bloomberg, citing documents published by the US Customs and Border Protection. According to them, these goods will not be subject to tariffs of 10% for 185 countries and increased fees of 145% for China.

This step is not the first mitigation of measures that Trump has made in the trade war he has unleashed. On April 9, the American president imposed a 90-day pause in tariffs for states that have not retaliated against the United States. However, relations with Beijing are only heating up: over the past week, the United States and China have announced several tariff increases against each other. By April 13, China had set fees at 125%, and the United States at 145%.

Trump decided to ease the requirements primarily for the import of electronics, as rising prices for computers and smartphones cause an instant negative consumer response, said independent expert Andrei Barkhota. As CNN predicted earlier, if, for example, Apple decides to move the production of iPhones to the United States from Asia, their price may increase 3.5 times — from almost $ 1 thousand to $ 3.5 thousand.

According to statistics, 80% of iPads and more than half of Mac computers are manufactured in China. About 90% of iPhones are assembled there, recalled Alexey Tarapovsky, founder of the Anderida Financial Group. For a long time, Apple has been arranging supplies and building production chains in Asia in order to make products as mass-produced and affordable as possible. And transferring production to the United States is, firstly, a slow process, secondly, expensive, and thirdly, it would affect the cost of the final product at least at the expense of more expensive labor.

— In turn, if smartphone prices rise, consumers start behaving irrationally. American users can start purchasing those categories of electronics where the loyalty level is high through parallel logistics (including through Canada and Mexico), while the pace of job creation will not grow within the United States," suggested Andrey Barkhota.

An increase in the cost of electronics may eventually inflate inflation in the United States. The fact is that, in general, the share of spending by American households on computers and smartphones manufactured in China is 10-25%, Andrei Barkhota noted. As a result of just one increase in duties, all other things being equal, the consumer price index in the United States could double by the end of the year.

— Part of this growth will be accounted for by the purchase of Chinese goods that have become more expensive, and part of this growth will be accounted for by categories that have been relocated for production in the United States. Moreover, the costs of relocation will be compensated by the American consumer," the expert concluded.

Apple and Nvidia's quotes collapsed due to Trump's tariffs

In addition to consumer dissatisfaction, technology companies could also push through the easing of duties on electronics, including giants such as Apple and Nvidia, experts interviewed by Izvestia believe. After the start of the trade wars, the quotes of both brands collapsed by more than 20% at the moment, however, on the news of the negotiations, the securities still regained some of the losses.

On April 9, Apple even ceased to be the most expensive in the world, ceding this status to the multinational corporation Microsoft, but on April 10 it returned to the first place.

— Building a value chain in all industries, including electronics, is not a fast process. Therefore, other "holes" will appear in Trump's tariff policy until a balance is found. It is difficult to say which industry will lobby for benefits during the transition period. But there will definitely be relief, and perhaps the real effective duties will not increase as significantly as they did when tariffs were raised in Trump's first term," predicted Ilya Fedorov, chief economist at BCS World Investments.

The US president may postpone the introduction of new duties on all electronics with semiconductor elements for the period of transferring production to the United States or reaching an investment agreement, Andrei Barkhota also believes. The same may apply to food and textile products from the EU.

As a result, according to the expert, exporters from countries that are already ready to sit down at the negotiating table will benefit. For them, Trump is likely to defiantly provide favorable conditions for investment and trade.