Silicon Valley wants President Trump to drop the tariffs he’s using as leverage in talks aimed at ending China’s theft of U.S. trade secrets.
The duties, which already cover $250 billion in Chinese goods, have done more than simply drain away cash that might otherwise have been spent on developing new technologies. They have prompted retaliation from Beijing that hurt sales of American products in the world’s second-largest economy and undermined the economic benefits of 2017’s GOP-led tax cuts in the U.S.
“I don’t think we can do a cost-benefit analysis of whether it’s worth having the tariffs in place in order to continue to press the Chinese on an agreement,” said Naomi Wilson, senior Asia policy director at the Information Technology Industry Council, a trade group representing the world’s wealthiest tech companies such as Apple, Amazon, and Honeywell. “We need the tariffs to be rescinded, regardless, because of the damage that they’re doing to the economy.”
Tech company executives have responded to the trade war by rearranging complex supply chains, spending money that might otherwise have paid for development of products such as artificial intelligence and 5G wireless technology that’s powerful enough to support self-driving cars, Wilson told the Washington Examiner.
Dell Technologies, for example, has developed a plan to move more of its production outside of China if Trump doesn’t get a trade deal he likes quickly enough and instead opts to tack tariffs onto an additional $267 billion in Chinese imports including notebooks and all-in-one desktop units.
“We’re pro-trade — we don’t think tariffs help end users at all,” said Jeffrey Clark, Dell’s vice chairman of products and operations for the maker of personal computers and cloud products for businesses.
“I have to respond to policy,” he added. “And if those are indeed the rules, we have a series of options that we will deploy to mitigate the tariff impact. They will raise costs. There will be a corresponding price move.”
Dell already adjusted its supply chain to curb the impact of previous tariffs on $250 billion of Chinese imports, he noted, and passed some of those costs on to consumers.
Trump had threatened to more than double those levies if he and Chinese President Xi Jinping were unable to strike a comprehensive trade deal during talks originally scheduled to last through March 1, a period executives and policy advisers alike said wasn’t long enough to accomplish anything meaningful.
The president said this week he would extend that timetable, without offering specifics.
Trump “has wanted a deal since November,” said Derek Scissors, who studies China for the conservative think tank American Enterprise Institute and has recommended the administration pressure individual companies rather than impose broad tariffs. “Since that time, the threat to hike tariffs on March 1 was not credible.”
Scissors previously called the talks “a total fraud,” arguing that nothing meaningful could be accomplished on the administration’s timetable, an opinion shared by global fund managers who told Bank of America the most likely outcome is a narrow deal that halts some tariffs without resolving broader issues.
“The Chinese know what we want, and they’re going to promise us some of what we want,” Scissors told the Washington Examiner. “The president is going to have to make the call on the basis of the same fake promises that the Chinese have made to previous governments that he has correctly criticized.”
A more optimal outcome, he said, would be China agreeing to take specific actions by mutually established deadlines — with U.S. Trade Representative Robert Lighthizer retaining the right to raise tariffs if Beijing fails to make good on its commitments.
While it might be possible for the administration to convince China to be more transparent about laws and policies that require U.S. companies to partner with state-owned firms and share trade secrets as a condition of access to the Chinese market, Wilson said, ensuring that Beijing follows through on such reforms would require a time frame far beyond Trump’s term.
“If there’s no means of following through on those commitments or keeping tabs on them — making sure that the political pressure on both sides is high — this becomes another commitment that’s not upheld in practice,” she said.
