This week, Avram Piltch discusses the impending impact of the trade war between the United States and China. The US imposed a 10% tariff on imports from China a while back, but a new and stronger tariff system is going into place now. The new tariffs will be 25% on billions of dollars worth of products, and will almost immediately be felt by consumers.
These new tariffs were felt in full force during Computex 2019. While it is not unusual to hear a company say that they aren't sure what the price point is going to be for a new product, this year the responses were different. Many companies said that they had a target retail price for their products, but that they weren't sure what the actual price was going to be, because they couldn't entirely predict how these taxes were going to affect the prices in the end.
Manufacturers are already beginning to look for ways to prevent these new tariffs. MSI CEO Charles Chiang spoke with Avram during Computex, explaining their plans. They and other larger manufacturers are beginning to look for new countries to manufacture their product in, such as Taiwan and Vietnam. While this would eventually represent cost savings, it is not inexpensive to move a manufacturing line, meaning that costs will still go up in the short term, but hopefully, less than they would with the tariffs. Not everyone can do this, though, so smaller brands might see big challenges in the upcoming months.
Another challenge to moving manufacturing to another country is infrastructure. Countries like Taiwan have a total population less than that of Shenzhen, the province of China where most manufacturing occurs. Add to that the need for roads, shipping, electricity, water, and more, and it creates hurdles that are not surmountable in the short term. The country could ramp up for production eventually, but it won't be able to handle a large influx in the next quarter.
