On Saturday, the US president Donald Trump signed an executive order imposing tariffs on US trading partners Canada, Mexico, and China.
Initially, the 25% tariffs on Canada and Mexico and the 10% tariffs on China were set to take effect this Tuesday. However, on Monday, Trump paused the tariffs on Canada and Mexico after they agreed to strengthen border security to combat illegal drug trafficking.
The US president also said on Monday that the European Union would “definitely” be hit with tariffs as well.
Trump’s initial moves have sent stock markets down, signalling broader fears of economic uncertainty, as Canada, Mexico, China, and the EU said that they would retaliate.
The tariffs will also affect the prices of consumer goods in many sectors, including electronics and cars.
“Consumer electronics typically have very small margins. As a result, higher costs cannot be absorbed by retailers, or other companies in the value chain, and must be passed on to consumers,” Shawn DuBravac, chief economist at Consumer Electronics Association IPC told Cybernews.
According to him, the price of some devices might increase immediately. In the long term, companies will likely seek alternative suppliers in countries not subject to the same tariffs, but establishing new suppliers and qualifying them can take time.
A few previous reports discussed the tariffs’ impact on consumer electronic devices. Last year, the Consumer Technology Association estimated that laptop and tablet prices could increase by 46%, video game consoles by 40%, and smartphones by 26%.
However, such numbers were expected if the US imposed a 60% tariff on China. Under current circumstances, the effect on consumer devices will likely be much lower.
Could impact almost all electronics
Cassandra Cummings, the CEO of an electronics design and manufacturing business, Thomas Instrumentation, says that in the short term, prices will increase on most, if not all, electronics.
“Almost all of the components such as integrated circuits (chips), bare printed circuit boards (PCBs), connectors, etc. are manufactured in countries such as China, Taiwan, Malaysia, India, and Mexico. Tariffs on those nations will increase the prices of these components and force US electronics manufacturers like ourselves to either cut into our profit margins or raise prices,” Cummings says.
She highlights that most electronics manufacturers have already cut deeply into their margins just to survive against Chinese manufacturing competition. Therefore, the only recourse left will be to raise prices unless Trump's administration also lowers taxes and other costs.
Last week, Trump said that he was planning to impose up to 100% tariffs on chips made in Taiwan. Taiwanese company TSMC, the largest semiconductor manufacturer in the world, currently makes chips for major US companies, including Apple, Qualcomm, and Nvidia.
The tariffs on Taiwanese chips would mean a further price increase for consumers.
Impact on the automotive industry
Meanwhile, the automotive industry currently faces an even more significant negative impact, as both Canada and Mexico export cars and their parts to the US.
According to Politico, Audi, BMW, Mercedes-Benz, Stellantis, and Volkswagen have operations in Mexico.
Last year, a Wolfe Research analyst estimated that if tariffs were imposed, the average car price in the US could increase by $3000.
Bloomberg data shows that the tariffs will affect 4 million out of 16 million vehicles sold each year in the US, as well as their parts.
Trump decided to impose tariffs on US trading partners citing the high production of fentanyl, migration, and trade deficits with those countries.
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