The US Trade Tariffs are Stifling American Manufacturing Innovation
By: Keenan Johnson
Tags: Trade, Government, Tech, Electronics, Policy

TO: Robert Lighthizer, United States Trade Representative

DATE: February 11, 2020

SUBJECT: Proposal to Reduce the United States Trade Tariffs for Electrical Components

I’m a technology leader that has built several highly innovative production lines for aerospace products in the United States. As you are aware, in 2018, the Office of the United States Trade Representative imposed an increased tariff on selected electrical components imported into the United States of America from China. Although the stated goal of this increased tariff is to “…protect America’s leadership in technology and innovation…”, this tariff in fact does the opposite.

One of the key components in any technological device is a printed circuit board assembly (PCBA). They exist in every electrical device you touch and are required for highly innovative technology.

The aforementioned tariff is imposed on many components that go into Printed Circuit Board Assemblies.

Although these PCBAs are highly critical for any technological device, the current US Tariffs are incentivizing the manufacturing of these devices to be done overseas instead of in the United States. This not only increases cost to Americans, but also decreases the rate of innovation. Innovation is directly correlated to the number of iteration cycles and the large transit times introduced by overseas transit limits the number of cycles and thus innovation.

The new tariffs introduced a 25% cost tariff on specific components that go into the PCBAs, but not a tariff on assembled PCBAs for many markets. Most subcomponents are not manufactured in the United States and must be imported. The result of this, is that it’s more expensive to import the parts and assemble these devices in the United States, than to have everything manufactured overseas.

Please repeal this increased tariff immediately in order to increase the amount of technology components that can be manufactured within the United States of America.

This repeal may be met with significant resistance by those that wish to inflict economic harm on China. This can be countered by explaining that it is currently cheaper for American companies to produce whole assemblies within China rather than here in America. See the attached statement from a prominent American manufacturer of PCBAs for a detailed breakdown of the costs associated. If the cost to produce is cheaper in China, then most American companies will make the sensible choice and produce their products in China, thus stimulating the Chinese economy instead.

Similar tariffs on complete PCBAs might also be suggested. This may increase US manufacturing revenue in the short team, but would eventually place the US significantly behind the rest of the world in technological capability. As John Cochrane, a Hoover Institute fellow at Stanford University, stated, if American manufacturers do not have to compete in the free market against Chinese products, then inevitably, the American products will become less innovative due to lack of competition.

Again I implore the United States Trade Representative to make the correct choice for the future of American Innovation and repeal these tariffs.

REFERENCES:

https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/june/ustr-issues-tariffs-chinese-products

https://macrofab.com/blog/decoding-tariff-impacts-us-electronics-manufacturing/

https://johnhcochrane.blogspot.com/2018/03/on-tariffs.html