2018 has brought unexpected volatility to consumer markets, due to escalating trade tensions between the US and China. Tariffs and the resulting reciprocation of customs pressure from other countries have distressed the supply chain for certain industrial sectors, but can we expect the same forces to exert similar price increases when it comes to consumer electronics and computers?
What Parts Are Made In China?
While many components of modern consumer electronics are made in China, there are also thriving manufacturing centers in Taiwan, Japan, Malaysia, Thailand and South Korea. Original Equipment Manufacturers (OEMs) collect components in their factories, assemble their completed systems and sell them to consumers under names like Dell, HP, Asus, Lenovo, etc. While companies such as Dell manufacture their machines in American plants, the components they put together overwhelmingly originate in China. Many core elements that make up components, such as rare earth metals, are mined in China or are mined by Chinese companies in the developing world.
What Products Are Most Likely To Be Affected by Tariffs?
Some computer components have been specifically identified for Tariffs by the Office of the United States Trade Representative. A 10 percent tariff must be paid at all US ports of entry on Chinese hard disk drives, solid state drives, motherboards, power supplies, optical drives, semiconductors, LCD and LED display panels, as well as a variety of other items. As of December, the US and China have agreed not to increase these duties beyond 10 percent for a period of 90 days, but prior to that agreement, the US had planned to raise duties to 25 percent in January of 2019. While the 90 day “cease fire” may offer a glimmer of hope that trade tensions are easing, experts are warning that the eventual increase to 25% may be inevitable.
What Does This Mean For The Average Computer User?
Prices have already increased for computers from many major manufacturers and it is likely that OEMs will seek to pass the cost of the tariffs directly onto the consumer. While it is unlikely we will see a return to the technology prices of the 90s, when a family PC would often cost between $1,000-$3,000 it is possible we will see price increases of 25% by the end of 2019. If it seems like it may be time to replace an old or ailing computer soon, it is probably a good idea to buy sooner, rather than later. We may see other areas of unexpected change as well—Intel reports that because server components are being affected by the tariffs, the price of cloud space may increase as well.
Fluctuation in the technology market is nothing new, companies have had to deal with various upward and downward market forces since the advent of personal computing. There have been few times however, when such forces have had such a broad effect on the technology sector as a whole. Such trends may mean it makes sense to maintain or upgrade existing technology, rather than replace it, or that upcoming replacements should be secured as soon as possible, to avoid the unpredictability of the market in the coming year or two.