After over a week of tariffs on products imported from China, the Trump administration issued rules late Friday that spared smartphones, computers, semiconductors and other electronic devices from several fees and took a major break in prices for high-tech companies such as Apple and Dell, as well as iPhones and other consumers.
The message posted at the end of Friday by US Customs and Border Protection included a long list of products that President Trump won’t face the competition’s president recently imposed on Chinese goods as part of a worsening trade war. Exclusions also apply to modems, routers, flash drives and other technology products, but these are rarely made in the US.
The exemption is not a complete reprieve. Other duties will continue to apply to electronic devices and smartphones. The Trump administration applied a 20% tariff on Chinese goods earlier this year on what the administration said was the country’s role in fentanyl trade. And managers will increase tariffs on semiconductors, an important component of smartphones and other electronic devices.
The move is the first major exemption from China’s commodities, which would have broad implications if the US economy continues. Tech giants like Apple and Nvidia will largely avoid punitive taxes that could significantly reduce profits. Some consumers have been rushing to buy iPhones this past week avoiding a significant potential price rise on smartphones, computers and other gadgets. And exemptions can weaken additional inflation and calm the confusion that many economists have feared.
Tariff relief was the latest flip-flop in Trump’s efforts to rewrite global trade to boost US manufacturing. Factory that fires iPhones, laptops and other electronic devices are deeply entrenched in Asia, particularly in China, and rarely operates without the power of galvanized plating, like the sudden tax proposed by the Trump administration.
“We are a great place to go,” said Matthew Slaughter, dean of the Tax School of Business in Dartmouth.
Electronic exemptions apply not only to China, but to all countries.
Still, the e-industry bailout may be short-lived as the Trump administration prepares for another national security-related trade investigation into semiconductors. This applies to some downstream products, such as electronics, as many semiconductors come to the US within other devices, said someone familiar with the issue. These investigations previously resulted in additional tariffs.
White House spokesperson Caroline Leavitt said in a statement Saturday that Trump is still committed to seeing these products and components being made domestically. “President Trump has made it clear that America cannot rely on China to manufacture key technologies,” she said in his direction, with tech companies “hustling US manufacturing as quickly as possible towards land.”
Senior managers said they were speaking in the background because they were not allowed to speak publicly, and said Friday’s exemption was aimed at maintaining the supply of American semiconductors, the underlying technology used in smartphones, cars, toasters and dozens of other products. Many cutting-edge semiconductors are manufactured overseas, like Taiwan.
Paul Ashworth, a North American economist in capital economics, said the move “represents partial emissions from President Trump’s trade war with China.”
He said the 20 product types exempted on Friday were exempt in the account, taking into account almost a quarter of US imports from China. Other countries in Asia will be even bigger winners, he said. Once tariffs in these countries begin again, he said the exemptions will cover 64% of US imports from Taiwan, 44% of Malaysia imports and nearly a third of imports from both Vietnam and Thailand.
The change broke the wild week, when Trump retreated from many of the tariffs he introduced on April 2. His so-called mutual tariffs introduced taxes that reach up to 40% on products imported from some countries. After the stock and bond markets plummeted, Trump said he would reverse the course and suspend taxes for 90 days.
China was one exception to Trump’s relief as Beijing chose to retaliate against US tariffs with its own tax collection. Instead of suspending tariffs on Chinese imports, Trump showed no willingness to increase them to 145% and spare businesses from those fees. In return, China said Friday it was raising tariffs on US goods to 125%.
It sent stocks of many tech companies into free falls. Over the course of four days, Apple’s valuation, which accounts for roughly 80% of the Chinese iPhone, reduced by $773 billion.
For now, Trump’s moderation is a huge relief for the tech industry, which has been residing in the president for months. Mehta, Amazon and several technical leaders stood behind him as he donated millions to President Trump’s inauguration and pledged to take office in January and invest billions of dollars in the US to support him.
Apple CEO Tim Cook is at the forefront of Trump’s industry courtship. He donated $1 million to Trump’s inauguration and later visited the White House, pledging Apple to spend $500 billion in the US over the next four years.
This strategy repeated Cook’s tactics during Trump’s first term. Cook has cultivated personal relationships with the president who helps Apple obtain tariff exemptions on iPhones, smartwatches and laptops as it heads towards a demand that Apple begin manufacturing its products in the US rather than China.
It is unclear whether Cook will be able to get a similar break this time, and the tariffs proposed by Trump were even more severe. Wall Street analysts said Apple may need to raise the iPhone price to $1,600 or more to $1,600 as the Trump administration increased taxes on Chinese goods.
The threat of iPhone prices increased, some Americans rushed to the Apple store to buy new phones. Others competed to buy computers and tablets made in China.
Apple did not immediately respond to requests for comment.
Apple’s iPhone quickly became a symbol of Tit-for-Tat over tariffs with China. On Sunday, Commerce Director Howard Lutnick appeared on CBS’s “Face the Nation,” saying tariffs “millions of troops are screwed into small screws to make iPhones in the US.” Lewitt said later in the week that Trump believes the US has the resources to make Apple’s iPhones.
“Apple invested $500 billion here in the US,” she said. “So if Apple hadn’t thought the US could do that, they probably wouldn’t have embraced that big change.”
Apple has faced questions about moving some iPhone manufacturing to the US for over a decade. In 2011, President Obama asked Apple co-founder Steve Jobs what it would take to make the company’s bestselling products in the US rather than China. In 2016, Trump also pressured Apple to change its position.
Cook remains steady in its commitment to China, and says the US does not have enough skilled manufacturing workers to compete with China.
“In the US, we don’t know if we can hold meetings of touring engineers and fill the room,” he said at a meeting in late 2017. “In China, multiple soccer fields can be filled.”
Additional tariffs on semiconductors and other electronics could come in the coming weeks or months. The administration, along with other duties on imported medicines, indicates that it is considering such duties under a legal law known as Section 232.
The President has already used the law to impose 25% tariffs on imported steel, aluminum and automobiles, weighing similar procedures for imported wood and copper. All of these sectors have been exempt from the so-called mutual tariffs announced by the President on April 2.
Speaking to reporters the next day, the president said other tariffs on tips would “begin soon,” adding that the administration was also watching drug tariffs. “We’ll be releasing that in the near future,” he said. “We’re currently under review.”
Other tariffs that the Trump administration has applied through the Section 232 investigation are set at 25%. This is much lower than the 145% tariffs currently in place on many products from China.
Maggie Haberman contributed the report.
