U.S. Electronics Manufacturers Grappling With Higher Costs from U.S. and Chinese Tariffs

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Almost 90 percent of U.S. electronics manufacturers are troubled by the higher tariffs imposed by the United States and China on each other’s imports, and some are investing less in the United States and hiring fewer workers as a result.

These are among the results of a survey conducted by IPC, a global association representing the electronics manufacturing industry, which queried its U.S. members between September 25 and October 2, 2019. Among the survey results:

• On average, companies report they have seen tariff increases on 31 percent of the total dollar value of the products they import. Twenty-five percent of companies report over half of the dollar value of the products they import are facing higher tariffs.
• Some 69 percent of companies report lower profit margins as a result of increased tariffs, with a ripple effect of negative consequences: 21 percent report they are reducing investment in the United States, and 13 percent say they are cutting back on hiring and/or reducing headcount.
• More than a third of companies report they cannot increase their prices to cover the cost of higher import tariffs, due to various factors.  
• Fifty-one percent of responding companies report they are now sourcing from countries other than China as a result of increased tariffs on Chinese imports.

“As the IPC research documents, rising tariffs are putting a painful squeeze on many U.S. electronics manufacturers,” said IPC Chief Economist Shawn DuBravac. “Many are facing supply-chain disruptions and steeper costs from the tariffs that have been imposed to date, and the impacts will grow as the trade war drags on.”

“Our industry has longstanding concerns about some of China’s industrial policies, including government subsidies and intellectual property violations,” said IPC President and CEO John Mitchell. “But addressing unfair trade practices by ratcheting up tariffs is like using a sledgehammer to make orange juice. In both cases, it’s the wrong tool and makes a mess of the job."

"We call on the governments of the United States and China to de-escalate the tariffs, focus on results at the negotiating table, and conclude agreements that address long-standing issues of concern to both sides," Mitchell said. "We also call on all members of the World Trade Organization to restore that body’s ability to play its role as arbiter of international trade disputes, so that nations won’t feel a need to resort to tariffs to resolve trade disputes,"