Roula Khalaf, the Editor of the Financial Times, curates a collection of her preferred stories in a weekly newsletter titled Editor’s Digest, which is available for free. This article discusses the implications of former President Donald Trump’s decision to exclude smartphones, laptops, and other consumer electronics from the “reciprocal” tariffs on China. Despite this exemption, 46 out of the 50 items that the U.S. heavily relies on from China remain affected by these tariffs.
An analysis of imported goods, each with a value exceeding $1 billion, highlights the potential impact of these measures on American consumers. More than 75% of video game consoles, food processors, and electric fans imported into the United States last year originated from China. Consumers interested in buying toys such as dolls, tricycles, scooters, and other wheeled toys may face increased prices since 75% of these goods came from China last year.
Mattel, the renowned toymaker responsible for the Barbie doll, has indicated the possibility of raising U.S. prices to mitigate the impact of the tariffs, a concern raised even before Trump’s recent intensification of the tariff war. This California-based company, known for brands like Hot Wheels and the Uno card game, produces 40% of its products in China.
The Trump administration’s recent decision to exclude items like smartphones, routers, chip-making equipment, and certain computers and laptops from the reciprocal tariffs follows a week of market volatility in the U.S. This decision is a significant victory for U.S. tech giants such as Apple, Nvidia, and Microsoft, who all experienced a dip in their share prices earlier. Laptops and smartphones were the top two high-value imports from China last year, totaling $74 billion. The exemption is particularly beneficial for Apple due to its predominantly China-centered supply chain.
However, Trump’s tariffs remain a concern for consumers interested in purchasing goods that are still subjected to the 125% levies. Chad Brown, a senior fellow at the Peterson Institute for International Economics, pointed out that the rapid and large-scale implementation of these measures means costs are more likely to be passed on to consumers. He highlighted the heightened potential for substantial price increases for people buying these types of products.
The tariffs could make staying cool during summer costly for Americans who are unprepared, as 90% of electric fans bought from abroad last year were from China. Additionally, 40% of self-contained air-conditioning units were imported from China, a market where China holds a dominant position. Those considering purchasing a new microwave might also face price hikes, given that 90% of them came from China last year, which controls three-quarters of the global export market.
According to Allie Renison, a former UK trade department official now at SEC Newgate consultancy, finding alternative manufacturers will be challenging due to China’s dominance in numerous global exports. She noted that American and Western businesses have been relocating their supply chains to other Asian nations in recent years. However, the reliance on Chinese raw materials and components in assembled products makes shifting even more complicated. The key issue is less about finding new suppliers and more about the conditions the U.S. will impose in agreements with these countries.
Transitioning manufacturing away from China proves particularly challenging for electronics like game consoles and mobile phones because of their intricate supply chains and the technical expertise required in their production. Jason Miller, a professor at Michigan State University’s College of Business, emphasized the difficulty of rapid decoupling for products such as smartphones, which requires generating additional capacity, training workers, and establishing new supply lines.
Even if Apple redirected its entire iPhone production from India to the U.S. market, it would only cover about half of the 50 million-plus units the company ships annually to the United States, according to Bank of America analyst Wamsi Mohan. Overall, 80% of smartphones and game consoles imported to the U.S. last year were manufactured in China. While Trump has not ruled out the possibility of exempting some U.S. companies from the reciprocal tariffs, there is concern among consumers that some products may become unavailable altogether.
Jason Miller expressed the greatest concern for consumers, noting that importers might stop importing certain goods from China if they fear they cannot pass on the tariff cost increases to consumers.
Additional reporting was contributed by Jonathan Vincent.