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There is uncertainty about the impact of President-elect Donald Trump’s proposed tariffs, but analysts agree the plan is likely to lead to higher costs for electronics.
In recent weeks, the incoming administration proposed tariffs on all imports, including a 25% tariff on imports from Mexico and Canada i 100% tariffs on products from BRICS countries. The move will also affect products made in the US with foreign parts.
“You’ve got whole servers coming in from China and you’ve got chips coming in from Singapore and being assembled somewhere like Texas. You’re still going to have fees,” he said James Smith, Senior Director, Gartner.
The details have yet to be worked out, but the implications have raised concerns about an increase in the cost of electronics.
“It’s really up in the air exactly how much the fees will be,” he said Rick Kowalski, senior director of business intelligence at the Consumer Technology Association (CTA). “The general sentiment we’re hearing is [tariffs] they will go up and up in many countries, but there are still many things we don’t know”.
While CIOs cannot predict the future, they can make plans to absorb the impact of these changes as much as possible.
How much will critical items go up?
In October, CTA published a report driven by Trade association worldwideLLC on how tariffs could affect the prices of many things CIOs buy, according to the framework Trump proposed before the election: 60% tariff on products from China and up to 20% orn other nations at a general level.
The analysis found that if these tariffs go into effect, and the full cost of the tariffs is passed on to the buyer, prices will increase on several items that CIOs buy. The cost of laptops and tablets would increase 45%adding $357 and $201 respectively to their average retail costs. Smartphones would increase more than 25%, with an increase in the average cost of $213while the cost of monitors would jump 31%
There is no alternative sourcing solution as China is the main supplier of these products. In 2023, China counted 78% of US smartphone imports, 79% of US laptop and tablet imports, and two-thirds orf US imports of monitors, according to the report.
CTA does not anticipate that the tariffs will stimulate new U.S.-based manufacturing of these products. For example, controlling imports from China would go down 80% with a global 44% percent decline in all imports, according to the report. At the same time, the organization estimates that American production would increase 10%not enough to combat rising prices.
Component bottlenecks can also affect supply chains, so that some items that CIOs may want to pre-order are suddenly out of stock. The situation is forcing CIOs to make decisions about where they will get products and how, he said.
How CIOs can respond
Despite those concerns, Smith said he hasn’t seen a large-scale movement of CIOs charging ahead for purchases of laptops, servers and other goods that will potentially be affected by future tariffs.
That’s not surprising with servers, since “you don’t have a lot of data centers under pressure,” he said. However, the fees may affect companies that were already facing rising cloud costs and were in the process of or planning to build on-premises facilities in data centers.
With physical goods, CIOs can talk to sellers now to see where the items are physically located before the rates go into effect. That way, these sellers can’t add surcharges to products that are already manufactured and in US warehouses.
If CIOs know they will need to make hardware purchases in the near future, they can also pay a commitment fee to have first access to items that are being made right now, with all of their components already made in the USA. Smith he said
While tariffs are a big concern, Smith said they’re not the only potential issue looming on the horizon ahead of the incoming Trump administration.
Immigration and visa changes could greatly impact the technology services CIOs rely on. This is especially true for US workers on H-1B visas, which are often used for technology jobs. Any changes could have a significant impact on technology-focused companies.
While changes to these and other visas were attempted during the first Trump administration wis largely blockedthis it might not be the case the second time around.
When talking to vendors about possible rate hikes, Smith said CIOs should also talk to them about their contingency plans if U.S. H-1B employees are no longer able to work in the country.
“It goes hand in hand with the fare piece,” Smith said.
