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List 4 Tariffs Force Companies to Consider Alternatives

USTR Hearing on List 4 Tariffs

Last week on June 17, a 7-day long hearing on the proposed list 4 tariffs opened.  Over 300 witnesses, most notably representing large technology companies, voiced opinions on the fourth list of proposed tariffs.  Notable organizations represented at the hearing include Apple, Intel, Microsoft, and the Port of Los Angeles.

Furthermore, nearly 50% of the list 4 tariff items include tech commodities.  As a result, Apple is exploring the possibility of moving up to 30% of their production capacity outside of China.  One of Apple’s main manufacturers recently made investments in both India and Vietnam that may become production alternatives for the tech giant.

Additionally, Dell, HP, Microsoft and Intel presented a statement to the USTR regarding the list 4 tariffs citing that their prices would go up by at least 19% should the tariffs go into effect.  The joint statement seeks to remove laptops from the final tariff list.  The statement goes further to address that should the companies pursue production alternatives, the venture would be a time and cost heavy process that would take money away from R&D.  Furthermore, Apple has taken the first step towards moving their supply chain out of China.  The company is rushing production and stockpiling key components ahead of the upcoming G20 summit on June 28 where Presidents Trump and Xi Jingping will resume tariff talks.

Approaching G20 Summit

June 28-29, the Japan G20 Summit will take place.  President Trump announced on June 18 that he will meet with Xi Jingping to resume trade talks at the summit.  The previous G20 meeting between the 2 leaders led to a 90-day truce on the tariffs with list 3 tariffs coming soon after followed by the current list 4 tariff talks.  The announcement followed a conversation in which he and Xi agreed to resume trade talks at the Osaka G20 Summit.

The circumstances of the situation changed since the last of the trade talks in May, however…  25% tariffs are already in place on lists 1-3.  Because of this, China may be more pressured to make a deal, although uncertainty still remains.  In addition to Apple, Intel, Microsoft, and Dell exploring supply chain alternatives to China, other large organizations like GoPro, Hasbro, Steve Madden, Black & Decker, Brooks Running, Whirlpool Corp. and Intel are also planning to move production away from China in the coming year.

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