There’s uncertainty about the impact of President-elect Donald Trump’s proposed tariffs, but analysts agree the plan is likely to result in higher costs for electronics.
In recent weeks, the incoming administration proposed tariffs on all imports, including a 25% tariff on imports from Mexico and Canada and 100% tariffs on products from BRICS countries. The move will also affect products manufactured in the U.S. with foreign parts.
“You have complete servers coming in from China and also have chips coming in from Singapore and assembled somewhere like Texas. You’re still going to have tariffs,” said James Smith, senior director at Gartner.
The details have yet to be set in stone, but the implications have raised concern about a spike in the cost of electronics.
“It’s really up in the air exactly how much the tariffs are going to be,” said Rick Kowalski, senior director of business intelligence at the Consumer Technology Association (CTA). “The overall sentiment we’re hearing is [tariffs] are going to go up and they’re going to go up on many countries, but there’s still a lot we don’t know.”
While CIOs can’t predict the future, they can make plans to shoulder the impact of these changes as much as possible.
How much will critical items go up?
In October, CTA published a report conducted by Trade Partnership Worldwide, LLC on how tariffs could affect the prices of many things CIOs purchase, based on the framework Trump proposed before the election: 60% tariff on products from China and up to 20% on other nations across the board.
The analysis found that if these tariffs go into effect — and the full cost of tariffs is passed onto the buyer — prices will go up on multiple items that CIOs purchase. The cost of laptops and tablets would surge by 45%, adding $357 and $201 respectively to their average retail costs. Smartphones would increase by more than 25%, with an average cost increase of $213, while the cost of monitors would jump 31%.
There aren’t any good sourcing workarounds as China is the major supplier of these products. In 2023, China accounted for 78% of U.S. smartphone imports, 79% of U.S. laptop and tablet imports, and two-thirds of U.S. imports of monitors, according to the report.
The CTA doesn’t anticipate that the tariffs would spur new U.S.-based manufacturing of these products. For example, monitor imports from China would drop by 80% with an overall 44% percent decline on all imports, according to the report. At the same time, the organization estimates U.S. production would increase by 10%, not enough to combat price increases.
Component bottlenecks can also impact supply chains, making some items that CIOs might want to pre-order suddenly go out of stock. The situation is forcing CIOs to make decisions about where they’re going to get products and how, he said.
How CIOs can respond
Despite these worries, Smith said he hasn’t seen a widescale movement of CIOs frontloading purchases of laptops, servers and other goods that potentially will be impacted by future tariffs.
That’s not surprising with servers since “you don’t have a lot of data centers on prem,” he said. Tariffs may, however, impact companies that were already grappling with increasing cloud costs and were in the process of or planning to to build on-prem facilities to data centers.
With physical goods, CIOs can talk to vendors now to see where items are physically located before tariffs go into effect. That way, those vendors can’t add upcharges to products that are already manufactured and sitting in U.S. warehouses.
If CIOs know they’re going to need to make hardware purchases in the near future, they can also pay a commitment fee to have first access to items being made right now, with all their components already made in the U.S., Smith said.
While tariffs are a big concern, Smith said that it’s not the only potential issue looming on the horizon ahead of the incoming Trump administration.
Immigration and visa changes could heavily impact technology services that CIOs rely on. That’s especially true for workers in the U.S. on H-1B visas, which are often used for tech jobs. Any changes could have a major impact on tech-focused businesses.
While attempted changes to these and other visas that happened during the first Trump administration were largely blocked, that may not be the case the second time around.
When speaking to vendors about potential tariff price increases, Smith said CIOs should also be talking to them about their contingency plans if U.S.-based H-1B employees are no longer going to be allowed to work in the country.
“It goes hand in hand with the tariff piece,” Smith said.
