Over the past four years, the United States has waged a trade war with China. In 2018, the Trump administration imposed Section 301 tariffs in response to China’s unfair trade practices, which include forced technology transfer and intellectual property theft. They were also intended to compel U.S. companies to move supply chains out of China. These tariffs are taxes paid by American businesses and consumers.
Americans deserve to know whether the Section 301 tariffs were effective, as well as how they affected our economy more broadly. With that goal in mind, the Consumer Technology Association (CTA) commissioned Trade Partnership Worldwide LLC to develop this report on the impact of the tariffs on the U.S. and global consumer technology industry.
The report shows that consumers and the consumer technology industry paid over $32 billion in tariffs through 2021. That sum has surely grown even larger over the past six months, likely reaching close to $40 billion. As the U.S. economy slowly recovers from several years of shutdowns and snarled supply chains, this means that companies are allocating scarce resources toward tariff payments. Instead, they could be investing in the research and development, equipment, job creation or workforce upskilling that helps bring new and innovative products to market.
Many technology companies, which include global technology companies as well as small businesses and startups, say they can no longer absorb the costs of tariffs without increasing prices for products. This trend is exacerbated by continued global supply chain challenges and higher shipping rates imposed by foreign ocean carriers. For American consumers, this means the technology they love and have come to rely on is less accessible and less affordable. Amid rising prices across all sectors of our economy, removing tariffs is an important step to help fight inflation.
As the report makes clear, the tariffs also failed to substantially shift supply chains. In the United States, Section 301 tariffs did not spur job creation or significant new investments in manufacturing. In fact, employment in the consumer technology industry stagnated and, in some cases, declined throughout the “trade war” period. Further, China remains a manufacturing base and source of finished technology products and inputs for the United States. In fact, imports of Section 301-affected tech products have risen or leveled off since mid-2020, suggesting that Section 301 tariffs are no longer motivating companies to leave China.
Meanwhile, certain U.S. trading partners are benefiting from the U.S.-China trade war. This report shows that production is shifting to markets with fewer barriers to trade: Vietnam, Taiwan, Malaysia, and Thailand. However, the United States does not currently have free trade agreements with these markets, making it harder for U.S. companies to compete in global markets.
Tariffs have not been an effective approach to addressing our economic disputes with China. They hurt U.S. businesses and consumers.
We call on U.S. policymakers to:
• Eliminate tariffs on consumer technology products to mitigate inflation, lower costs and unlock the innovative power of the U.S. economy.
• Eliminate tariffs on inputs to revitalize U.S. jobs and U.S. manufacturing of technology products.
• Immediately create new and expand existing trade agreements, including with Vietnam, Taiwan, Malaysia and Thailand, to make manufacturing investments in the U.S. more attractive.
CTA is proud to contribute to the ongoing national discussion on the China Section 301 tariffs, and I hope you find the data and insights contained in this report as compelling as I do.CTA_Section 301 Tariff Whitepaper
To read the full report from the Consumer Technology Association, please click here.