Trump's Tariffs Impact Tech Industry: Electronics, Chipmakers Brace for Impact
President Trump's 10% tariffs on imports from China are set to take effect, impacting a wide range of electronics from PCs to smartphones. Additionally, Trump has hinted at potential tariffs on chips and chip-related products, which could intensify the pressure on the tech industry.
The tariffs on Chinese goods form part of a broader package aimed at China, Canada, and Mexico. Trump recently announced a one-month pause on tariffs with Mexico after productive talks with Mexican President Claudia Sheinbaum.
The tech sector relies heavily on manufacturing facilities in China for the production of consumer electronics. Companies will have to determine how to respond to the 10% tariff. Some may absorb the costs themselves, while others may pass them onto consumers, leading to higher prices for both consumer and enterprise products. If Trump proceeds with tariffs on chips, the costs could further escalate, especially amid existing inflationary pressures.
"The impact will be significant," said John Vinh of KeyBanc Capital Markets in an interview with Yahoo Finance. "We anticipate a negative impact on demand as prices increase, which will ultimately trickle down to chip manufacturers."
Chip stocks, including Nvidia (NVDA), AMD (AMD), and Intel (INTC), experienced declines in trading on Monday.
Apple Faces Risks from China Tariffs
Apple may face the most significant risks from the initial round of tariffs due to its extensive manufacturing operations in China. Tariffs will apply to all Apple products, from iPhones and iPads to MacBook Pros.
A 10% tariff on a $999 iPhone 16 Pro would result in a $99 price increase. Similarly, the cost of a $1,599 MacBook Pro would increase by $159. Apple could absorb all or part of the tariff costs, but this would erode profit margins.
According to BofA Global Research analyst Wamsi Mohan, Apple may need to shift manufacturing to other countries to mitigate the impacts. Mohan estimates that sourcing 80% of products from outside China could minimize the impact to $0.05 per unit, while sourcing only 50% could result in an impact between $0.07 and $0.12 per unit, depending on whether the price is increased.
Apple has been collaborating with Indian manufacturers to produce its latest iPhones in India, providing a potential alternative source for devices. However, Trump has also floated the possibility of raising tariffs to 60%, which would have more severe implications for Apple.
Chips Safe for Now, but Future Uncertain
While the current tariffs do not directly impact advanced chips, Trump has indicated plans to levy separate duties on them. This could force chipmakers to increase prices or absorb the costs.
Price increases would be passed down to device manufacturers, including PC makers, who could either absorb the costs or transfer them to customers. Companies investing heavily in AI chips, such as Amazon (AMZN), Google (GOOG, GOOGL), Meta (META), and Microsoft (MSFT), would face increased costs for data center construction.
Tariffs would not immediately lead to the establishment of new chip manufacturing facilities, as semiconductor fabrication plants (fabs) take years to construct. While companies like TSMC and Samsung are building fabs in the US, they will still rely on facilities in other countries.
Wedbush analyst Dan Ives believes the near-term risk to chip companies is low, particularly in relation to AI. "Tariffs will not hinder the AI Revolution trade," Ives said. "We anticipate exemptions to this policy, likely including Apple products and Nvidia chips."
However, the duration of any trade dispute and the possibility of future carve-outs are uncertain. The situation remains in the hands of President Trump.