China Announcement Good for Telecom Sector, Though Uncertainty Lingers
Carriers concerned about rising prices for iPhones and other devices and gear from China got good news early Monday as the Trump administration struck a preliminary agreement to temporarily slash a proposed tariff on Chinese imports from 145% to 30%. “We have reached an agreement on a 90-day pause and substantially moved down the tariff levels -- both sides, on the reciprocal tariffs, will move their tariffs down 115%,” said U.S. Treasury Secretary Scott Bessent.
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Last week, the Consumer Technology Association warned that the price of smartphones could increase 31% on average as a result of tariffs. “Consumer purchasing power could decline by as much as $123 billion per year, depending on how tariffs are implemented and how supply chains respond,” CTA added at the time. Industry officials also warned last week that high tariffs could hurt carriers and others in the telecom sector (see 2505080052).
CTA CEO Gary Shapiro welcomed the agreement Monday. As his group “has always advocated, we all benefit from free and fair trade,” Shapiro said on X. “We hope to see the Administration build on this positive trade momentum with permanent solutions announced in the days and weeks to come.”
The China trade agreement “removes the clouds that existed about what would happen if the [tariff] exemption ... expired,” Recon Analytics’ Roger Entner told us. Reports say “Apple is thinking about raising prices anyway and would include whatever the tariff would be in that,” Entner said. “In the end, iPhones and other wireless devices will be built in the place that has the lowest total cost, including tariffs, as long as the quality and quantity standards are met.”
A 30% tariff “is still really, really high, especially combined” with the 10% tariff the U.S. is “imposing on everyone else,” economist Paul Krugman said Monday on Substack. The average U.S. tariff rate will now be around 13%, up from around 3% pre-trade war, he said: “Before all this drama, that would have been seen as wildly protectionist.”
Krugman warned that the tariffs are paused, not canceled. “Nobody knows what will happen in 90 days,” and “I’ve long argued that the uncertainty created by Trump’s arbitrary, ever-changing tariffs is at least as important as the level of those tariffs.”
Former U.S. trade representatives similarly raised concerns about the tariffs and trade policy during a Center for Strategic and International Studies discussion Monday.
“Shooting yourself in the foot just is not a great approach to trade policy,” said Susan Schwab, USTR under President George W. Bush. “The challenges that we have with China have not gone away, and what was agreed over the weekend does not address them.”
“We all dealt with China, and most of us made an agreement of one kind or another,” said former USTR Rob Portman, who also served under Bush and was later a Republican senator from Ohio. The Chinese are “very tough negotiators and very frustrating,” Portman said. “The supply chain does need to be de-risked.”
The challenge is “the continued uncertainty over where we’re going,” said Michael Froman, USTR under former President Barack Obama. Companies remain unsure what the supply chain will look like in the months and years to come, he added. “The sooner there’s clarity around this … the better for everybody.”
The U.S. has always tried to get China to move away from protectionism, restricting foreign investment and engaging in subsidization and industrial policy, Froman said. “Rather than China becoming more like us, which was the expectation, we’ve become more like them,” he said: “The question is can we do” industrial policy “as well as they do it, and my guess is probably not.”
There’s “no question that we have become more like China than China has become like us in economic policy,” said Carla Hills, USTR under President George H.W. Bush.