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Your favorite tech products might be about to get more expensive – here’s why

Pabio November 7, 2024

I am not an economist and my financial sense is, as my partner would tell you, suspect. But I fundamentally understand one thing: if you charge companies more to make or ship products, they won’t bear those extra costs and will serve them to you like overcooked porridge.

With former President Donald Trump now officially President-elect of the United States and set to take office on January 20, he will surely fulfill a key campaign promise: import duties of between 12% and 60%. At the forefront of technology is China, which is expected to experience the most draconian tariff structure of 60%.

There are no hard numbers on how much technology is produced in China and other countries, but it is a fact that most of the gadgets you love and use are not made in the United States.

AmazonFor example, would make most of its Fire and Kindle products in China. Apple produces most of its iPhones in China, but has moved some manufacturing and other Apple equipment in India and Vietnam. In the same way, Google makes Pixels and other devices in China, Vietnam, Taiwan and India. Lenovo product most of its laptops in China.

The hard truth

I have no problem with products being manufactured where it is most efficient and cost-effective. I know labor is cheaper and proximity to components is better outside the US.

It is also likely that regulations will be somewhat more lenient, for example in China and Vietnam, although US companies have tried in recent years forcing their Chinese counterparts to comply with American manufacturing standards for things like safety. I want everyone to be safe at work and receive a decent wage, but I also value the tech equipment I can still afford. It would be fantastic if we could have both, but that might be unrealistic.

The objective of tariffs is to correct trade distortions. The United States does indeed have a trade deficit. On Election Day in the United States, the Census Bureau released its United States International Trade in Goods and Services Report for September 2024 (PDF). The main headline was that the trade deficit increased by $13.6 billion to a total of $84.4 billion.

Another tariff objective is to encourage companies to repatriate their production to the United States, which, according to Brooking’s Institute is far behind Chinawhere manufacturing accounts for 27% of the country’s output, compared to just 12% in the United States. And it is well known that the majority of technology production, including that of semiconductors, still takes place outside the United States.

Tariffs don’t do what you think they do

It seems unlikely that tariffs will change this equation in the near future. In fact, tariffs have always had the opposite effect than intended. According to the Cato Institute:

“Recent empirical evidence indicates that new U.S. tariffs imposed in 2018 and 2019 were almost entirely passed on to U.S. consumers, leading to higher prices and reduced export growth.”

I repeat, the tariffs imposed on businesses are passed on to us, which means they manifest themselves in the form of higher prices for the technology products we buy every day. The Cato Institute also adds that tariffs lead to increased protectionism (protecting us from unwanted foreign competition) and corruption.

It is possible that the tech giants will take another route and accelerate their plans – if they have any – to relocate their production to the United States. Of course, this law could result in increased costs just for building the infrastructure and paying American workers higher wages for the same work they get from Chinese employees at a fraction of the cost.

Do we have a plan?

I asked GoogleAmazon, LenovoAnd Apple how they plan to manage these potential tariffs. Will they simply absorb the additional cost or pass it on to consumers? Amazon had no comment. As of this writing, the others have yet to respond.

I doubt they would bear the cost of tariffs, but don’t expect any of them to readily admit that prices are about to go up on, say, your next iPhone, your future computer laptop or your new product. To light up.

However, if these tariffs are imposed early next year, the costs will have to go somewhere. Although this requires companies to move production back to the United States in the long term, in the short term it will result in higher costs for technology companies and more expensive technology equipment for consumers.

On the bright side, we have a Black Friday right in front of us. It might be a good idea to stock up on these gadgets now.

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