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Understanding the Impacts of US Tariffs on Component Costs

July 30, 2019
Understanding the Impacts of US Tariffs on Component Costs

In March 2018, the US government began announcing intentions to apply Tariffs on goods imported into the United States. These Tariffs were to be applied to countries perceived of unfair trade practices. This article provides insight into the additional costs of electronic and PCB related components exported from China for products produced or assembled in the US.

Initially the Tariffs impacted Steel and Aluminum imports from China, Mexico and Canada, but expanded rapidly to include three rounds of new Tariffs affecting many products identified by their HTS or Harmonized Tariff Schedule code. One could argue that the Trump administration primarily targeted China based on a huge and increasing US trade deficit and "unfair transfers of American technology and intellectual property to China". In fact, in 2018 the US trade deficit with China stood at $419 billion USDs.

Tariffs were applied to Chinese imports in three rounds, Initially, a tariff involving US$34 billion in imports imposed a 25% duty on goods which went into force on July 6, 2018. The second round added a 25% duty on another US$16 billion in imports, which went into force on Aug 30, 2018. The third round add a 10% duty on an additional US$200 billion in imports. This duty was changed to 25% on May 10, 2019. More recently, there has been some discussion on adding a fourth round of Tariffs and the remaining Chinese imports totaling US$300 billion. Listing of the actual HTS codes for each round of Chinese Tariffs are available on the US Trade Representative website ustr.gov and identified by the first 8 integers of the HTS code. The lists of Tariff items:

Many of the HTS codes impacted by these tariffs include electronic and PCB level components. Understanding component part numbers impacted by tariffs requires knowledge of the HTS code for the component and the Country of Origin or final assembly location. Tariffs impact over 800 products and over 6000 unique HTS codes from 18 major PCB component part types. Impacted HTS codes carry a 25% duty if final assembly was done in China. Tariff duties are paid by the importer and past down the supply chain to the end customer.

The highest risk categories based on the IHS Markit Component Parts Database include: Data Line Filters and Fixed Inductors.

Many parts potentially impacted by Tariffs can be purchased from countries other than China as indicated below. However, for 27% of parts affected, a 25% Duty cannot be avoided.

IHS Markit has collected Country of Origin content for over 108 million part numbers, the majority of these parts 80% are manufactured only in a single country, while 20% are shown to come from multiple countries. A breakdown of countries by number of parts with country of origin information is shown below:

A high number of unique part numbers with country of origin data is available for Passive manufacturers as indicated below:

The future of Chinese tariffs remain uncertain. US President, Donald Trump, and China’s General Secretary, Xi Jinping, are expected to meet at the G20 summit.Depending on how negotiations between nations evolve, a new fourth round of tariffs could be applied to Chinese imports, tariffs could remain as they are or could gradually be rolled back. Still, tariffs are likely to remain in force through 2019.

The good news for companies and employees trying to determine tariff cost impacts is that IHS Markit can provide solutions to tariff challenges through the advanced reporting capabilities in the BOM Intelligence application and/or custom data services. For more information, please visit: ihsmarkit

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