← POLITICO Tech
POLITICO Tech
Tech beat Trump's tariffs once. Can it happen again?
00:20:12
President-elect Donald Trump has promised sweeping tariffs on all U.S. trading partners, including a whopping 60 percent tariffs on goods from China. And Trump’s allies are already plotting how to get them implemented. But tech lobbyists are preparing to fight back, with arguments about how tariffs will harm companies and worsen inflation. On POLITICO Tech, host Steven Overly chats with Ed Brzytwa of the Consumer Technology Association about the industry’s plans for the tariff war ahead.
Loading summary
Transcript35 lines
- [00:00]
Snapchat Ad
Presented by Snapchat. Stay connected with new location sharing features coming soon to Snapchat's family center. Snapchat's in app Parental tools that help families navigate the digital world together.
- [00:15]
Stephen Overlea
Hey, welcome back to Politico tech. Today's Thursday, November 14th. I'm Stephen Overlea. President elect Donald Trump was back in Washington on Wednesday. He dropped by the White House to shake hands with President Joe Biden, then headed to Capitol Hill for meetings with Republicans with his buddy in chief, Elon Musk in tow. Trump has made clear he intends to start executing on his agenda from day one, and that includes plans to impose sweeping tariffs on all US trading partners. 10 to 20% tariffs on imports from most countries and a whopping 60% tariffs on imports from China. My political colleague Gavin Bide has reported that Trump's allies are already plotting how to implement these tariffs and how to convince skeptical lawmakers to get on board. But some tech folks are already preparing to fight, including the lobbyists at the Consumer Technology Association.
- [01:20]
Ed Bristois
We're going to have some anti tariff swag. It's either going to say like terrified or or tariffs heard.
- [01:28]
Stephen Overlea
This is Ed Bristois, CTA's vice president of International Trade.
- [01:33]
Ed Bristois
I haven't made up my mind, but I think terrified is pretty good.
- [01:36]
Stephen Overlea
Ed worked on trade policy during the Bush and Obama administrations and he's now plotting arguments of his own for why Trump should back off his plans and why Congress should intervene to stop him. And it's worth pointing out that tech companies were quite successful in winning that debate during Trump's first term. Although this time around, both Trump and his agenda are far more aggressive. On the show today, Ed and I delve into the tariff war ahead. Here's our conversation. Ed, welcome to Politico Tech.
- [02:15]
Ed Bristois
Well, it's great to be here, Stephen.
- [02:17]
Stephen Overlea
So you know, Trump promised universal tariffs on the campaign trail. He's been elected. Now, I've got to know who's blowing up your phone right now the most.
- [02:27]
Ed Bristois
The press. I'm getting lots of interview requests, but in all seriousness, we're getting a lot of inquiries from our members. They are anxious to hear more about what will actually happen when the president comes into the office in January. And they are worried about the prospect of more tariffs, both 60% tariff on all imports from China and a 10 or 20% universal tariff on all imports from all countries. This would be quite devastating to them.
- [02:57]
Stephen Overlea
I want to talk about that because, you know, I'm a former trade reporter myself and I have to admit I'm like Jazzed in a very nerdy way to be talking about tariffs again, although this probably isn't the tariff conversation you want to be having. How different do you think tariffs might be this time around under Trump? Because we obviously saw them the first time, and it felt unprecedented then. I wonder what differences you see now.
- [03:25]
Ed Bristois
So think about the tariffs from 2018 and 2019. Trump first imposed tariffs on steel and aluminum. That was a very small amount of trade in the overall amount of trade that the United States does every year. Then he moved to impose tariffs on imports from China. Ended up being $370 billion in 2017 trade. Even that is still relatively small amount of overall imports into the United States.
- [03:54]
Stephen Overlea
Right.
- [03:54]
Ed Bristois
What's different now is that the tariffs he's proposing would cover all imports from all countries. So that's trillions of dollars of imports, not 370 billion or, you know, far less. For steel and aluminum, we're talking about trillions of dollars. And if he imposes a 60% tariff on all imports from China, that's covering all the trade with China at this point. So this is 10 times higher in terms of the order of magnitude. It could even be greater than that.
- [04:28]
Stephen Overlea
Well, I know that CTA commissioned an analysis ahead of the election, sort of trying to assess what impact these tariffs would have on consumer electronics in particular. From that report, it was calculated a 46% increase on laptops and tablets, 40% increase on video game consoles, and 26% increase on smartphones. I wonder, what does that mean practically for the companies you represent?
- [04:54]
Ed Bristois
It means less people buying their products, practically. So Americans don't like price increases. They did not like inflation. They don't like paying for more for what they need. And that study that we issued, I think, was quite clear that a price increase of 46% for laptops and tablets would lead to less purchases of those items by Americans. People are going to hold onto their products for longer. So that means that the products that our companies want to deliver to the marketplace, the market will evaporate because the prices will be too high. If the tariff is 60%, they're going to pass that cost onto consumers in one way or another. They're not going to absorb it. It's far too high.
- [05:39]
Stephen Overlea
That was an argument the industry I know made the first time around when Trump imposed tariffs. In making that argument, consumer electronics were largely exempt from the first round of tariffs. I'm curious what you think made tech so successful in avoiding tariffs at that time.
- [05:59]
Ed Bristois
The products we're talking about smartphones, laptops, and tablets Video game consoles. It's true those products did not get hit with Section 301 tariffs. However, there were many, many products and inputs that were important to CTA members that did get hit with Section 301 tariffs on every single list. So let's. Right, you need to keep that in mind as well. I think the reason why we were successful in avoiding the tariffs is because these are very price sensitive goods and the consumers would know right away that prices would go up. And even the Trump administration then understood that imposing tariffs of that magnitude on things that people use every day that are very important in terms of our overall society, we are a technological society that would not be in their best interest.
- [06:49]
Stephen Overlea
On note, as you said, CTA's membership kind of ranges from Amazon to Ford to John Deere, the tractor company. You all represent quite a broad swath of kind of the consumer goods market. How will that affect the way you go about countering the tariff proposals this time around? You know, both for tech and then kind of more broadly when you look at sort of the sweeping tariffs that could affect every product category?
- [07:14]
Ed Bristois
Well, you did mention some important companies, but I also want to remind the political audience that there are thousands of small businesses in the technology space and 80% of our members are small businesses and startups. And they felt the most disproportionate impact of the Section 301 tariffs. And I have no doubt that a 60% tariff on imports from China or 10% or 20% on all imports from all countries would similarly impact them in a disproportionate way. But what I also think is quite important is that many companies decided to move their supply chains out of China in the wake of the section 301 tariffs and they went to produce in other markets. It was very difficult for them, if not impossible, to produce in the United States just because of the complexity of producing consumer technology products and the cost. So if those that universal baseline tariff of 10 or 20% comes into effect, those decisions that those companies made would be penalized. They would be undermined. And that's not in our interest as a country as well, when we're trying to penalize companies for doing the right thing.
- [08:29]
Stephen Overlea
Well, let me play devil's advocate here because one of the motivators for these tariffs was to bring manufacturing back to the United States. And you know, the data doesn't show that that has necessarily borne out, but the goal there is both economic oriented in terms of helping to drive the US Economy and also national security oriented in terms of reducing Reliance on China in particular. What can be done to encourage more companies to move their manufacturing to the US if it's not tariffs that put an economic penalty, in a sense, on companies for continuing to manufacture in China?
- [09:09]
Ed Bristois
Well, look, we have to be very clear eyed about what products we want to make in the United States. What are the types of national security oriented products that need to be made in the United States? From our perspective, you know, we're talking about products that are sold to consumers. Making those types of products in the United States would be very, very costly. We did a study in October of last year that looked at the business case of whether we could move production of consumer technology products from China into the United States. And these are products for the U.S. marketplace. And we found that that was a $500 billion direct business investment over the course of 10 years. And that's a very conservative estimate. And that would require a 10x increase in labor. And that's before you get to the environment costs or the energy costs. And we found that proposition to be neither desirable nor feasible. And we looked at a second scenario of whether we could do this in concert with our allies and with our key trading partners to keep the costs lower for consumers. If we agree that moving supply chains out of China is a laudable goal, how do we avoid increasing the costs to consumers and forcing them to pay more? And we need to work with our treaty allies in Europe, in Asia, like Japan and Korea, but also our close trading partners like Mexico and Vietnam and India. We can't do all of this without them. And just to say we're going to impose a 20% tariff on all imports and then magically, production is going to start for all these items overnight in the United States. That is not going to happen. It would take a very long time and it's going to take a lot of cost.
- [11:03]
Stephen Overlea
Well, those two scenarios you mentioned, right, Kind of moving out of China to the US or moving out of China to kind of trade allies, would either of those be cheaper ultimately than paying a 60% tariff? If, like, that's the choice companies are faced with?
- [11:17]
Ed Bristois
Certainly moving production into our treaty allies and close trading partners, if we make the right investments, if we identify the right types of capacity in these countries and build on that capacity, that would be less expensive than paying a 60% tariff. Some of our companies, when they tried to move out of China and they looked at their sourcing options in other markets, they said, well, it's much more difficult and more costly for us to stand up new production in these other markets without having some certainty that the quality will be as high or that we can scale up as fast as we want to to produce those items. They decided that the safer bet was to be in China and to pay that 25% tariff at 60%. I think the dynamics might be a bit different and the companies that we talk to, they still say even at 60%, the business case to move production to the United States just isn't good enough for them to do it.
- [12:22]
Snapchat Ad
Stay connected with new location sharing features coming soon to Snapchat's Family Center, Snapchat's in app parental tools that help families stay connected. Request your teen's location and share yours back to help keep everyone in the family up to date on each other's comings and goings. Review privacy settings together and have conversations about what choices were best for your family.
- [12:45]
Stephen Overlea
You know, the last time around, Apple CEO Tim Cook was very savvy about cultivating a relationship with Trump, and I think that was seen as a major reason why Apple in particular was able to avoid tariffs on a lot of its products made in China. I wonder, as you're thinking about kind of strategies moving forward now, does that kind of charm offensive from industry need to happen again?
- [13:12]
Ed Bristois
We need to explain very clearly to the future Trump administration, to our contacts on Capitol Hill, in Senate offices and representative offices, what the impacts of the tariffs are going to be. It's not just about how much tariffs are going to be paid. It's about the opportunity cost for companies. If they're paying tariffs, they're not hiring. If they're paying tariffs, they're not investing in new product lines, they're not investing in research and development. To us, that is a very anti innovation part of the imposition of tariffs. We think over the course of time that's going to lead to less competitiveness for the US Economy if the tariff payments are what companies are focusing on and not actually growing their businesses.
- [14:01]
Stephen Overlea
Is inflation part of that argument too? Because it does occur to me that Trump was just elected in part on sentiment among voters that inflation has been too high, that when they go to grocery stores their bills are too high. And here we have tariffs that could increase costs of goods here yet again, I wonder if that's going to be an argument that you'll be teeing up.
- [14:24]
Ed Bristois
We are already teeing that up. I mean, it's very apparent to us and I think a lot of people that are looking at this equation of whether new tariffs would benefit the US Economy, that they would cause inflationary pressures there's other factors in our economy that also could cause inflationary pressures. I mean, I also think of immigration. If we're taking labor out of the workforce, that has an impact on wages, that deprives companies of a larger labor pool. So that puts pressure on inflation as well. Why would American voters over the last four years not tolerate inflation, but somehow tolerate increased prices through tariffs over the next two to four years? That doesn't add up for us.
- [15:12]
Stephen Overlea
You also mentioned Capitol Hill and talking to lawmakers. I am curious to get your perspective on something as someone who's been in Washington and in trade law and policy a long time. You know, my political colleagues reported recently that Trump may actually look to Congress to implement some of these new tariffs, even though Congress has not imposed new tariffs in nearly 100 years. And having covered trade myself, I know that the reality is there are kind of fewer free trade Republicans in Congress now than there used to be. And so I wonder whether you worry about that and whether you do see allies still on the Hill for kind of pushing back on universal tariffs.
- [15:56]
Ed Bristois
Look, I think that there are plenty of voices on the Hill that look at the idea of a universal tariff on all imports from all countries with a lot of suspicion, mainly because it impacts both our allies and our adversaries. And it would lead to retaliation. It would lead to less exports to foreign markets. It would actually create an opening for our adversaries to supplant that market share. There are a lot of unintended consequences of a universal baseline tariff with respect to economics, with respect to foreign policy, with respect to our national security that I think both Republicans and Democrats are thinking about. It's not a benefit only proposition of new tariffs. And, you know, we question even whether there's a benefit in the first place.
- [16:45]
Stephen Overlea
One more question for you. Last time, Trump initiated a trade war, not just with China, but with Europe and with others around the world, we did see retaliation. We saw tariffs imposed on American imports. We saw other efforts to undermine supply chains or undermine trade. And so given that these tariffs are higher, I could certainly see even harsher responses than we saw last time around. I wonder for you what kind of retaliation from China in particular you're worried about, given how much exposure consumer goods and specifically consumer electronics have to the Chinese market.
- [17:27]
Ed Bristois
So last time in 2018, 2019, most of the retaliation was through the imposition of tariffs by our trading partners. So that restricted the ability of US Companies to export to those markets. It's very possible that retaliation takes a similar form if the universal baseline tariff comes into effect or the 60% tariff on all imports from China comes into effect. But there could be other forms of retaliation. More pressure on US Companies operating in China, perhaps even more targeting of the core industrial components of our competitiveness. So we are a very technologically based economy, and at the heart of our competitiveness is our technology leadership. So I would think that other countries could look to the technology sector and try to find ways to undermine that competitiveness. We've seen some countries do that through measures like digital services taxes or data localization requirements. Certainly those countries might be thinking about additional tools beyond just tariffs to put pressure on the United States. So I could see retaliation taking many different forms.
- [18:41]
Stephen Overlea
Well, listen, Ed, really interesting insights here and I appreciate you being here on Politico Tech.
- [18:47]
Ed Bristois
It's my pleasure, Stephen. Thanks so much for hosting me today.
- [18:56]
Stephen Overlea
That's all for today's Politico Tech. For more tech news, subscribe to our newsletters, Digital Future Daily and Morning Tech. Our managing producer is Annie Reese. Our producer is Afraid Abdullah. I'm Stephen Overlea. See you back here tomorrow.