Exempting Electronics from Tariffs

Trump Once Again Has Shown the Absurdity of His Global Tariff Policies

After day-after-day trashing of China trade over unfair government practices, currency manipulation and state-ordered intellectual theft to more than double the cost of Chinese imports, Donald Trump has blinked again to exempt smart phones, computers and semi-conductor electronics from the ultra-high tariffs.

It’s a crazy development in an already rollicking economic war.

It will also affect electronics produced in Taiwan, Vietnam, Malaysia, India and other tariff targets, but most attention will be on the China relationship. Other economic sectors could follow, the White House said, without identifying them or explaining how exemptions are in line with orders to raise Chinese tariffs to 145% more than current rates.

Trump must think he graciously has heeded among the loudest complaints from Congress, businesses and consumers about the possibilities for $3,000 phones as if a $50 T-shirt is considered okay.

In reality, he once again has shown the absurdity of his global tariff policies.

Exempting electronics may pay off Apple and other Silicon Valley Trump backers who had bristled over the ever-rising costs of their products in the United States, backing their influence with million-dollar donations to Trump campaigns.

But it will have absolutely no effect on, say, the tremendously higher cost for Chinese manufacture of prescription drugs now ensured by the tariff policy — especially at a time when the very same Trump administration is seeking to slash Medicare/Medicaid funds and to limit enrollment in government-backed health plans.

For all that Trump says ails Chinese trade, ensuring that tariffs are aimed at cars and T-shirts rather than electronics hardly will provide any resolution.

The heart of anti-China complaints concerns intellectual theft of industrial secrets. How many industrial secrets could there be about T-shirts?  And the only secret about Chinese cars is how they can be produced so much more cheaply than U.S. counterparts.

What Exactly Is the Target?

Apart from smartphones, laptop computers, electronic watches, the exclusions would also apply to transistors and semiconductors, which are largely not made in the United States.

But while modern car manufacture is heavily based on electronic components, the exemptions do not apply to cars.

In 2023, China’s top exports to the United States were primarily electrical and electronic equipment, followed by machinery, nuclear reactor parts, furniture and lighting, toys, sports equipment and plastics. China’s biggest customer is the United States, followed by the European Union. U.S. top exports to China are agricultural products.

Without electronics, that list looks light on targets for intellectual theft. If this global trade war is about manufacture of toys and machine parts, the entire policy — already showing signs of strain over bad math, shifting explanations and lack of specific goals — seems questionable all over again. Are we really basing a global trade war and its recessionary effects on furniture imports?

By exempting electronics, where is the Trump hammer to force the tech companies to return their manufacturing to the United States at much higher production costs and wages? If electronics are the key element of U.S.-China trade, why cut them out of the debate?

How does this make any sense to markets, to investors or consumers?

What we’re witnessing is an almost random hopping from one justification to the next, depending on who is whispering in Trump’s ear.

Perhaps this is just the sort of development that can goose the Congress to look more kindly on efforts to retake control of tariff policy.

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