Major Tech Companies Ask for Exemptions on New Tariffs

September 7, 2018
1071 Views

The United States is preparing to implement a new round of tariffs on $200 Billion worth of Chinese goods. These tariffs, the latest in a prolonged trade dispute between the U.S. and China, could be financially crippling, and could threaten American jobs, according to tech companies.

Petitioners Include Some of the Most Important Tech Companies

Cisco (NASDAQ: CSCO), Dell (NYSE: DVMT), Juniper Networks (NYSE: JNPR), and Hewlett Packard Enterprise (NYSE: HPE) are the four companies currently requesting tariff exemptions from the Office of the U.S. Trade Representative. Between them, these publicly owned companies represent almost $330 Million of total market capitalization. They are amongst the largest companies that have so far requested tariff exemptions in 2018.

All four companies have significant interests in computer networking hardware, which they say will become more expensive if the threatened $200 Billion worth of Chinese tariffs are introduced this September. The companies argue that not only will their profits suffer, but their customers will also feel the impact. Each company supplies large enterprise, as well as small and medium business clients. The financial impact could be felt all the way down to local family businesses.

In a joint letter, the four companies told the Office of the U.S. Trade Representative that “If USTR were to impose a 10-25% additional duty on networking products and accessories, it would cause broad, disproportionate economic harm to U.S. interests, including our companies and U.S. workers, our customers, U.S. consumers, and broader U.S. economic and strategic priorities.”

Cisco is particularly concerned that tariffs would have an impact on emerging technologies that are critical to both industry and the U.S. government. The expected 2020 roll-out of 5G cellular network technology is one example where tariffs could delay or raise the cost of implementation.

The companies represented in the letter are not the largest in the wider tech industry, but they are four of the most critical companies for internet infrastructure in the United States. Increased operating expenses and higher product prices would have real and measurable consequences for U.S. consumers and businesses. The consumer cost could reach as high as $5.7 billion per year, according to the letter.

Tariffs Can Hurt Domestic Interests in the Short and Mid-Term

While tariffs are intended to balance trade and pressure foreign governments to renegotiate existing agreements, they can have a negative short and mid-term impact on the domestic economy. The government is currently trying to balance a delicate issue. But, as is clear from this latest petition, widespread tariffs can have the potential to do as much harm as they do good, regardless of the end goal.

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