US-China trade pact brings relief to tech sector
The two countries appear to be walking back from a costly tit-for-tat exchange on tariffs, announcing a 90-day reduction in import taxes as they continue to negotiate a more lasting deal.
The tech sector saw its stocks tumble earlier this year as massive tariffs threatened to strain supply chains and raise consumer prices.
While it received some relief last month when President Trump exempted electronics from the import taxes, the industry's outlook is even more optimistic now as tensions ease.
'It's a relief valve for U.S. Big Tech,' Wedbush Securities analyst Dan Ives told The Hill. 'It takes the nightmare supply chain situation off the table.'
The U.S. and China announced Monday that they had agreed to reduce tariff rates for 90 days amid negotiations. The U.S. will lower tariffs on Chinese goods from 145 percent to 30 percent, while China will reduce import taxes on American goods from 125 percent to 10 percent.
The trade truce marks a sharp departure from months of escalation between Washington and Beijing.
'It's de-escalation from what could have been an incredibly damaging set of outcomes for both China and the United States if those tariffs stayed in place at those very high rates. So, in my view, cooler heads are prevailing,' said Ed Brzytwa, vice president of international trade at the Consumer Technology Association.
While trade tensions were rising between the two countries in the first few months of President Trump's second term in office, they took a turn for the worse when Trump announced wide-ranging 'reciprocal' tariffs in early April.
This included a 34 percent tariff against China, which, when coupled with an earlier 20 percent import tax, brought the total rate on Chinese goods to more than 50 percent. The two sides went tit for tat on tariff increases before settling at rates well above 100 percent.
The hefty tariffs on Chinese imports spooked the tech industry, whose supply chains are heavily reliant on China.
Trump also levied tariffs on India and Vietnam, where tech firms have increasingly relocated their manufacturing in recent years to diversify their supply chains and shield them from potential disruption.
The president ultimately put most of his 'reciprocal' tariffs on hold amid widespread market panic. However, he left the China tariffs, along with a baseline 10 percent import tax, in place.
Trump later exempted electronics from the tariffs, although the victory was short-lived for the tech industry, after Commerce Secretary Howard Lutnick signaled plans to implement sector-specific tariffs.
The recent detente between the U.S. and China has many in and around the tech sector hopeful about the possibility of a larger trade deal and greater economic stability and certainty.
'Our hopes and prayers are that of course this a forerunner to a more negotiated deal,' David Warrick, executive vice president of Overhaul, a software-based supply chain solutions company, said.
'The hope from the tech sector perspective is that this is a really good starting point,' Warrick added. 'Now, how well can we negotiate to get us to a more balanced agreement?'
The Information Technology Industry Council (ITI) touted the recent development as 'meaningful progress toward reducing bilateral tensions and stabilizing the global economy.'
'Importantly, the significant temporary tariff pause from both parties will help bring certainty to business operations and economic markets,' ITI President and CEO Jason Oxman said in a statement.
'The tech industry welcomes the constructive and serious approach both governments have taken and urges leaders from both sides to leverage tech sector input and feedback as they continue negotiations,' he added.
Following the announcement, Trump said he spoke to Apple CEO Tim Cook, who he said plans to open more plants in the U.S.
Apple was particularly vulnerable to the tariffs, as the iPhone maker manufactures the vast majority of its products in China. Cook previously promised to invest more than $500 billion in the U.S. over the next four years, including through building a new facility in Texas.
However, some experts are still voicing caution, emphasizing that the future of U.S.-China trade relations remains uncertain.
'The reduction in tariffs and apparent progress to a wider trade deal reduces the risk of further tariff escalation, but does not remove it completely,' Chris Rogers, head of supply chain research at S&P Global Market Intelligence, said in a statement to The Hill.
Tariffs are still relatively high compared with previous rates, and the tech industry faces the prospect of additional sector-specific import taxes down the line.
'Let's just keep in mind that, yes those tariff rates are really high, but the tariff rates that are now going to be in effect as of tomorrow are also very high historically speaking,' Brzytwa said.
'This is still relatively complex and, depending on what the tariff is for any given product, it still might be high enough where a company decides that tariff payment isn't worth the cost of importing it,' he continued. 'The company might not be able to even sell the product in the United States.'
'We're not out of the woods yet there,' he added of the sector-specific tariffs. 'That is also a source of uncertainty and unpredictability for us. It's still difficult for our companies to plan around this.'
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