Consumer Technology Association (CTA) Research Finds Tariffs Will Harm Tech Economy

Brilliant, a smart home technology startup based in California, is an example of American innovation. It employs 30 people across four states who are working to launch a smart switch that adjusts lighting by responding to touch and voice, while also acting as a video intercom. Brilliant’s latest innovation won a CES Innovation Award.

However, tariffs now threaten the company’s success – and its employees’ livelihoods.

The Trump administration is considering tariffs on another $200 billion of products from China – a decision that would hurt the tech economy, which is powering our nation’s growth and strong job market.

Although the administration has said tariffs will boost the U.S. economy, CTA research shows tariffs will do the opposite. A 25 percent tariff on certain devices from China that we all use to connect to the internet will cost our economy $2.4 billion.  

The tariffs include what are known as printed circuit assemblies – a key part of many basic tech products. Should the administration enact the tariffs, U.S. companies will be forced to either pay higher prices for Chinese printed circuit assemblies or purchase from other nations – a shift that will, on its own, cost upwards of $613 million annually.

The economic impact on connected devices will be even more dramatic. Everything from modems and routers to fitness trackers and wireless headsets will become more expensive – and consumers will bear the burden with higher costs for these devices. This, in turn, will result in a drop in demand, making the many benefits of connectivity even less affordable for the average American.

To give a specific example: Based on CTA forecasts, U.S. sales of smart speakers in 2019 will total more than 44 million units. If, however, a 25 percent tariff is enacted, that number could fall to 39 million units. Similarly, the report predicts that in 2019, the wholesale price of a smartwatch will be $228 – but with a 25 percent tariff, the price would increase to $242.

All told, the tariffs on connected devices mean that consumers will have to pay as much as $3.2 billion more in 2019 for the tech devices they love. It’s a move that will hurt the consumers who buy these technologies and the small businesses that use them to sell their products. With this sort of impact, it’s no wonder that over a thousand economists sent an open letter to the president earlier this spring, urging him to reconsider using tariffs against China. And, according to a recent survey by the National Association for Business Economics, more than 90 percent of economists think these tariffs harm the economy.

Getting China to play fair is a worthwhile goal: According to the Commission on the Theft of American Intellectual Property, a group comprised mainly of former defense contractors and cybersecurity experts, we lose between $225 to $600 billion each year due to China’s ongoing cyberespionage and theft of our intellectual property – a reality that hits the tech industry particularly hard. But implementing tariffs doesn’t help the situation and ultimately hurts American consumers.

Federal policymakers have encouraged economic growth via tax cuts and deregulation: Economic confidence is at a remarkable high and business is booming. If the Trump administration rejects tariffs and keeps our trade duty free, consumers and business owners alike will continue to have the opportunity to capitalize on this growth and remain global leaders in innovation and entrepreneurship.