As tariffs on Chinese imports soar as high as 145% under the Trump administration, the U.S.-China trade conflict has intensified—driving up costs, straining supply chains and raising concerns about lasting economic fallout. UH Mānoa Asian Studies Professor Eric Harwit, an expert in Chinese technology and trade, explains how these tariff hikes could hurt consumers and warns of broader consequences if semiconductors—vital to products from cars to kitchen appliances—are targeted next.
What is a tariff?
Well, a tariff basically is a tax on imports coming from a foreign country. The revenue goes to the American government but actually the payers of the tariffs are the importers, which are Americans. The important thing here is that tariffs add to the price of a product that an American pays which essentially translates into higher prices or inflation for American consumers.
What challenges do U.S. companies face when tariffs are raised, lowered or suspended with little warning?
The main problem is for American manufacturers, especially those who depend on imported components. They plan ahead for their production, many years ahead and so if they don’t know what the price of the importer product is going to be it makes it very difficult for them to continue their manufacturing in an efficient way. When tariffs go up and down or are suspended a few months here and there, it really plays havoc with what the manufacturers can do in terms of their planning and development. So it’s really going to harm, I think, many American manufacturers with unpredictability of the tariff rates.
President Trump has hinted at implementing tariffs on semiconductor chips produced in China. How could that impact the everyday consumer?
There are a lot of semiconductors in all kinds of products that people use daily, certainly our cars but even microwave ovens, those all need those kinds of advanced chips. If the producers of those products don’t know how much the chips are going to cost going forward then that affects their whole ability to manufacture efficiently. And again it’s going to increase the price of those products in the United States.
Theoretically in the long run it could help to develop the American semiconductor manufacturing sector, but again that’s in the very long run. In the near term, it’s going to harm American electronics producers. They won’t be able to get the chips that they need. China produces more of the “legacy chips” in other words, the less advanced chips that we use for automobiles for consumer electronics. They produce more than all the other countries in the world combined. If we can’t get those chips from China then anything pretty much that we manufacture using those kind of chips is going to be affected. And that’s going to harm the overall manufacturing especially those high tech sectors in the United States.
If we’re trying to be more competitive with China, say in the automobile industry or competitive with other countries, putting tariffs on imported chips from China is just going to slow down our ability to improve our automobile quality and production numbers and raise the prices of those products and harm the companies that we’re trying to help, mostly the car companies and consumer like products, electronic makers in the United States.
What long-term impacts could high tariffs and trade restrictions have on the U.S.-China economic relationship?
It’s going to devastate our economic ties between the U.S. and China. The Chinese in fact, are going to be looking with suspicion of future economic ties with the United States going forward. What it’s really going to do is drive the Chinese to develop their own technologies independent of American know-how. In some ways we’re sowing the seeds of our own destruction by not importing Chinese semiconductors and not exporting our own technology to the Chinese. They’ll develop their own technologies, cooperate more with Southeast Asia, maybe with Japan, South Korea, Europe definitely would still like to work with China. So we’re really isolating ourselves economically and that’s not going to be good for the American economy or for American consumers.
We should also do what President Biden advocated, which is to invest in our own technologies so at the same time that we keep our economic ties with China, we focus on developing technologies homegrown and compete with China; not defeat China but compete with them. And then it’s a win-win development for both countries.
