Tech giants warn on US-China escalation

Tech giants warn on US-China escalation
File photo

Apple has joined Dell, Microsoft, HP and Intel in opposing US President Donald Trump’s proposed tariffs on laptop computers and tablets among the $300bn (€268bn) in Chinese goods targeted for a 25% tariff increase on July 2 when the consultation period for public comment ends.

The companies say the tariff escalation will harm US technology businesses, hindering their ability to innovate and compete in a global market place.

The crunch issue is that Dell, HP, and Microsoft —who account for about half of the traditional PCs, notebooks and detachable tablets sold in the US — have many of their manufacturing plants in China and import the bulk of them from there.

If the new import tariff is applied by the Trump administration this will add 19% to the average selling price for laptops and tablets, about $120 onto the average retail price of a laptop in the US. Hence, the increase will hit them hard in their home market.

This could be catastrophic for the US players who have a major presence in Ireland and, according to the research firm International Data Corp, have already seen a flat year on year growth in global shipments of traditional computers in the first quarter.

Apple, Microsoft and Dell between them employ 8,319 staff in Ireland, generating a global sales turnover of €154bn. A hit in their US market will adversely affect their global competitiveness and inevitably impact their Irish operations.

Conversely, the tariff war gives Chinese manufacturers such as Lenovo, Acer and ASUS a competitive advantage on global markets. Chasing after Huawei, by the US administrators, is a futile exercise, if it loses out the global technology market to other players.

Intel, with their extensive presence in Leixlip, fortunately have a foot in both camps, supplying the likes of Chinese manufacturer Lenovo as well as US corporations Dell and Hewlett Packard with microprocessor chips.

However, they have also joined with the likes of Microsoft who supply operating systems for most of the PC manufacturers in putting pressure on the Trump administration, to exclude the PC industry from the proposed 25% tariff during in July — it’s just not good for business.

The announcement that Mr Trump and China premier Xi Jinping will meet at the G20 summit in Japan next week to re-launch trade talks gives hope it may be a phoney trade war and that sense will prevail, as with the recent Mexican threat.

The US trade administration has been escalating international tension on global markets since Mr Trump’s election, with a particular focus on Chinese trade so far. China has inevitably responded with its own counter tariff charges.

Tariffs imposed by both countries over the past year have pulled down global economic growth, and added to the uncertainty in Europe.

Still, the prospect of a resolution was raised last week as Mr Trump said trade negotiations with China are set to resume shortly.

But there are other critical global issues that will be watched carefully other than the meeting between Mr Trump and Chinese premier Mr Jinping at the G20 summit in Japan.

The meeting between Mr Trump and Vladimir Putin is also scheduled for the G20, as well as Turkish President Erdogan. The recent purchase of Russian S-400 missile system due to arrive in Turkey next month is viewed as a significant affront to the US and to Nato.

Everything now comes down to the Trump-Erdogan meeting as possibly the last chance to avert US sanctions which is likely to be levied over the weapons purchase.

John Whelan is managing partner of international trade consultancy The Linkage- Partnership

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