How Trump Tariffs Could Raise Prices of Electronic Devices and AI
Trump’s tariffs could raise the prices of tech devices like laptops, AI, and smartphones, CNBC has reported. The price rise will be triggered in part by Foxconn’s expansion to Mexico. The chip and electronics maker will be shifting a significant portion of its manufacturing functions to the huge factory it is constructing in Mexico.
The global electronics manufacturing company plans to assemble Nvidia AI servers in Mexico. This means the products would be subject to Trump’s tariffs if they take effect.
New Challenge
Tech companies have previously grappled with tariffs on consumer goods from China in 2018. However, the tariffs that the Trump administration has proposed to impose on electronics imported from Mexico present a new challenge. This is because most firms expanded their production to the country as they sought to manage COVID-19 disruptions.
“If we increase the tariffs on Mexico, it’s actually penalizing the companies that have been very progressive and trying to make great strides and restructure their supply chain,” Supplyframe CMO, Richard Barnett said.
Trump will be providing details about the specific tariffs that his administration will be placing on imports from Mexico, Canada, and China. Investors will be seeking to know what impact Trump’s tariffs on technology will affect big tech businesses as Microsoft, Apple, and Tesla release their quarter four earnings this week.
High Consumer Prices
Experts warn that trade wars fueled by new tariffs can lead to gadget price raise for consumers and slow global commerce. Analysts say that the Trump administration could be seeking to use the new taxes to negotiate with countries over concerns like migration and drug trafficking.
“The four big implications of tariffs that I foresee are higher prices, fewer rate cuts from the Fed, slower growth and fewer new jobs,” Brett House, Professor at Columbia Business School.
During campaigns, the US President hinted at imposing a 10% tariff on all imports and a 60% tariff on goods imported from China. Since taking office, Trump has already backed off from large duties and is discussing 10% duties across board for imports from Canada and Mexico; and 25% for goods from China.
Pursuing a 60% duty on Chinese imports would have a big impact on US buyers. If applied, such duties would push tablet and laptop prices up by 45%. The cost of video game consoles would surge by up to 40%. Smartphone prices would increase by 26%, which represents a $213 increase.
“It’ll affect the unit sales, meaning that each product will go up in price significantly,” Gary Shapiro, CEO at CTA said.
Mexico-US Trade
In 2023, electronic imports from Mexico increased by 18% to hit the $103 billion mark, up from $86 billion in 2019. Mexico is the second-largest electronic product source for the US after China. In 2023, the US imported electronic products worth $146 billion from China.
Over the last few years, Foxconn, Hisense, and Lenovo announced plans to set up factories in Mexico. Singapore-based electronics and gadgets maker, Flex claims that it is the biggest exporter in Jalisco- Mexico. The Trump administration may be seeking to ensure that Chinese firms like Hisense and Lenovo do not avoid duties by expanding to Mexico.
“If you look at Chinese investment into Mexico, it has gone through the roof in the last three to five years,” Simon Geale, Executive VP at Proxima said.
