The White House’s new 125% tariffs on Chinese imports will hit the electronics sector hard, causing prices for many products in the category to rise substantially. According to Bloomberg, the U.S. imports 86% of its $6 billion worth of gaming consoles, 79% of its $5 billion worth of computer monitors, 73% of its $41 billion worth of smartphones, 70% of its $16 billion worth of lithium-ion batteries, and 66% of its $32 billion worth of laptops from China.
The fact is that many tech companies, including American ones like Dell and HP, manufacture most of their products in China. That means consumers and businesses that need these goods will have few alternatives made in other countries. If Trump’s 125% tariffs on Chinese products remain in place, about $100 billion worth of goods could double in price overnight.
While gaming consoles are primarily aimed at the consumer market, the other products listed above are also aimed at American businesses. All of this could lead to higher costs that will force American companies to raise their prices, which in turn will increase inflationary pressure on the country’s economy.
Even if electronics manufacturers were willing to build factories in the U.S. to avoid tariffs, it would take a long time. So ordinary Americans will likely have to live with higher prices for some time. And having domestic manufacturing doesn’t necessarily mean that prices will drop to pre-tariff levels, especially if they have to import components and raw materials to make their products. More expensive labor in the U.S. won’t help lower prices either.
Several companies, such as Framework and Razer, have previously suspended sales of their products in the US to assess the impact of the new tariffs and develop a strategy. Apple managed to import five planeloads of its products to the US before the new tariffs came into effect, which should allow the company to avoid raising prices for some time. However, most companies cannot do this, so if high tariffs on goods from China continue, we should expect prices to rise across the board, especially for products that cannot be replaced by similar products from other countries.
Another side effect of the new tariffs will be the negative impact of China’s restriction on rare earth metal exports. Exporters of rare earth metals needed to make advanced semiconductor products now need a special license. That could make it harder for the U.S. to obtain the materials in the quantities it needs.