Trade war tariffs have collapsed US imports of Chinese IT hardware and consumer electronics
- US imports from China of IT hardware and consumer electronics have slumped 62 per cent since 2018, a new study shows
- However, American imports of exercise equipment and lithium batteries from China have jumped considerably
Four years into the trade war, China has lost significant US market share in IT hardware and consumer electronics to Mexico and Taiwan, though its exports of low-end semiconductors have not yet been fully replaced, a new study has found.
Former US president Donald Trump imposed a 25 per cent tariff on Chinese-made network servers, modems, routers, wireless headphones and smartwatches in 2018 when he fired the first salvoes in the trade battle.
Since then, US imports from China of IT hardware and consumer electronics have slumped 62 per cent, whereas imports from the rest of the world are 60 per cent higher, the Peterson Institute for International Economics (PIIE) said in the study, published on Thursday.
China’s share of US imports for these products has been cut by nearly two-thirds, from 38 to 13 per cent in four years, according to the American think tank, with Mexico and Taiwan now “sizeable” foreign suppliers.
But in regards to semiconductors, which power an array of electronic devices at the core of the modern economy, the US has not fully replaced the loss of Chinese imports, PIIE said.
China accounted for 47 per cent of US chip imports by volume before July 2018, but its share fell to 39 per cent immediately after the tariffs were imposed, PIIE said.
China’s foundries specialise in “more mature nodes”, producing a high volume of basic semiconductors – also known as “legacy” chips – that have lower profit margins.
These products are unattractive to chip making giants such as Taiwan Semiconductor Manufacturing Company or South Korea’s Samsung, which prefer to produce more advanced and profitable chips, PIIE said.
“Given that legacy chips are not particularly profitable to manufacture, and if the United States does not want to import them from China, then who will produce them? That is the question facing America’s industrial consumers – like the auto sector – of large volumes of legacy chips,” PIIE said.
The auto sector is one of the industries that have had to scale down production as a result of global chip shortages. Semiconductor supply fell early in the coronavirus pandemic, triggered by factory closures. Sales of electronic devices then soared because of remote working, which led to an imbalance that grew worse over time.
Despite tariffs, US imports of exercise equipment and lithium batteries from China have jumped considerably, the PIIE report said.
China now has more than 50 per cent of the US market for both products, thanks to rising demand for treadmills, rowing machines and electric vehicles among US consumers.
Products that are exempt from US tariffs – including laptops, computer monitors, phones, video game consoles and toys – now account for 27 per cent of total US imports from China, up from 21 per cent before the trade war started.
The think tank said data only revealed changes in where the imports were assembled, not any changes to the value-added content of the goods imported by the US.
According to PIIE, there is some evidence of China-US trade decoupling, which has come at the expense of American businesses.
“Policy decisions made today to reduce economic interdependence between the two countries will have profound implications for both economies, and neither will escape unscathed,” said PIIE.
But a recent review in August left in place a 25 per cent levy on goods worth about US$16 billion.