Upon initiating his trade war, then-President Donald Trump stated his objectives: to repatriate American jobs and manufacturing, diminish trade deficits, and foster a more equitable environment for U.S. companies competing globally.
However, following protracted negotiations and the refusal of numerous nations to concede to U.S. demands, his strategy has adopted a more punitive nature.
American businesses have navigated such circumstances previously.
During Mr. Trump’s initial term, when tariffs were imposed on Chinese exports, companies endeavored to curtail their exposure to Beijing, with many relocating production to Vietnam, Thailand, and India to circumvent elevated levies.
However, his latest array of tariffs encompasses these economies as well. Stock markets experienced a sell-off, with key indices in Taiwan and South Korea registering losses on Friday.
Both nations are pivotal to Asia’s expansive electronics manufacturing sector.
While details remain somewhat unclear, U.S. firms ranging from Apple to Nvidia are likely to face increased supply chain costs, as they procure critical components from various Asian countries and assemble devices within the region.
They are now responsible for increased costs across iPhones, chips, batteries, and a multitude of other components essential to modern technology.
This development poses a challenge for Asian economies that have experienced growth and prosperity through exports and foreign investments, encompassing Japanese automobiles, South Korean electronics, and Taiwanese semiconductors.
Surging demand for these goods has historically fueled trade surpluses with the U.S., leading to President Trump’s assertion that Asian manufacturing has eroded American employment opportunities.
In May, Mr. Trump reportedly told Apple CEO Tim Cook: “We put up with all the plants you built in China for years… we are not interested in you building in India, India can take care of themselves.”
Apple generates approximately half of its revenue from iPhone sales, with manufacturing operations in China, Vietnam, and India.
The technology giant reported robust earnings for the three-month period ending in June, just hours before Mr. Trump’s tariff announcement on Thursday evening, but the outlook has now become more precarious.
Chief executive Tim Cook told analysts on a conference call that tariffs had already cost Apple $800m (£600m) in the previous quarter, and may add $1.1bn in costs to the next quarter.
While tech companies typically engage in long-term planning, Mr. Trump’s unpredictable tariff policy has created uncertainty for businesses.
Amazon’s online marketplace, for example, is significantly reliant on China for products sold in the U.S.
However, the potential tariff rates on Chinese imports into the U.S. remain unclear, pending a trade agreement between Beijing and Washington, with a deadline of August 12.
Prior to agreeing to de-escalate, the two nations had implemented retaliatory tariffs that reached as high as 145% on certain goods.
The issue extends beyond China alone.
On Thursday, Mr. Cook noted that the majority of iPhones sold in the U.S. are now manufactured in India. However, Mr. Trump has imposed a 25% tariff on Indian imports, following Delhi’s failure to secure a timely trade agreement.
Following the initial round of tariffs implemented during Mr. Trump’s first term, several firms opted to reroute goods destined for the U.S. through Vietnam and Thailand, a strategy commonly referred to as “China+1.” However, this time, these trans-shipped goods are also being targeted.
In fact, trans-shipping has been a significant aspect of U.S. negotiations with Asian countries. According to Mr. Trump, Vietnamese imports are subject to a 20% U.S. levy, while trans-shipped goods face a 40% tariff.
Advanced manufacturing sectors, such as semiconductors, face even greater challenges, with Taiwan accounting for more than half of the world’s chip production, including a majority of advanced chips. These are now subject to a 20% tariff.
While semiconductors constitute the foundation of Taiwan’s economy, they are also integral to U.S. efforts to establish a technological advantage over China. Consequently, U.S. companies, such as Nvidia, will incur substantial levies to incorporate advanced chips manufactured by Taiwan’s TSMC into their AI products.
However, the most significant repercussion of Mr. Trump’s tariffs may affect Asia’s e-commerce giants, as well as American companies that rely on Chinese sellers and marketplaces.
In a surprise move this week, Mr. Trump abandoned the “de minimis” rule, which had exempted parcels valued under $800 from customs duties.
He initially implemented this measure in May, targeting parcels originating from China and Hong Kong, which negatively impacted retailers such as Shein and Temu, whose success has been driven by online sales in Western markets.
Now American sites like eBay and Etsy have also lost that exemption – and the price of second-hand, vintage and handmade items for US customers will go up.
President Trump contends that these tariffs are intended to benefit Americans; however, in an increasingly interconnected global landscape, U.S. firms and consumers may also bear the consequences.
The prevailing uncertainty renders it challenging to discern the ultimate beneficiaries of these policies.
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