The Consumer Technology Association estimates the trade war has already cost US tech companies a total $17.5bn.
Background: Throughout his presidency, Donald Trump has developed conflictual trade relationships with China, in an effort to protect US intellectual property in the technology sector. This led to escalating tension, with the US imposing tariffs on more than $360bn of US goods since June 2018, and China retaliating with tariffs on more than $110bn of US products.
A big step forward: On 15 January 2020, governments of the two countries signed a trade agreement to roll back tariffs on a range of products, as China commits to boost US imports by about $200bn compared to 2017 and to strengthen intellectual property protection. The tech industry welcomed the agreement, but was clear in saying that more needs to be done. The US Consumer Technology Association (CTA) called the ‘Phase One’ agreement a big step toward the normalisation of trade relationships between US and China, but called for a ‘Phase Two’ deal to eliminate special tariffs on Chinese imports “once and for all”. The Internet Association (which includes Amazon, Google, Facebook, Twitter, among others) also welcomed the deal, hoping it will result in the easing of “harmful tariffs”.
A $17.5bn bill to pick up: The CTA estimates that US tariffs have cost US tech companies $17.5bn, including $1.7 billion in taxes for products critical to 5G deployment. Through November 2019, tariffs on ‘List 1–4A products’ have added about $19.2bn billion to tech product imports, including those for 5G deployment. The CTA also notes that tariff costs will remain higher despite the Phase One deal, because most of the tariffs being paid are products on List 3 which will not benefit from the announced tariff cuts.
The situation with Huawei remains unresolved: The Phase One deal, which partially eases the burden of the trade war that has escalated in the last two years, does little to improve Huawei’s position. In fact, with the US Treasury Secretary saying the company is not a "chess piece" in the negotiations, the agreement could end up creating clearer separation between trade and national security. Since May 2019, Huawei is on the US Government’s Entity List which imposes restrictions on the company when trading with US businesses. This is not only harming Huawei itself, but also US companies such as Google, which can no longer provide the Android OS to Huawei mobile devices.
