MW Why Trump's tariffs may bring worse-than-expected price hikes to consumer electronics

By Therese Poletti

Industry group's grim report was little noticed during week of CES

As CES winds down in Las Vegas, one cloud hanging over the desert not often mentioned in all the coverage of newly unveiled gadgets was a prediction by the show's host of how much prices for consumer electronics could jump due to the possibility of new tariffs.

President-elect Donald Trump has been very vocal about his plans for more tariffs on imported goods, with the largest planned for those made in China, where many electronics products are assembled. This column has predicted tech-industry turmoil and price hikes from the expected tariffs, but the recent report from the Consumer Technology Association, published as CES kicked off this week, predicts far more dire tariffs and a price impact worse than previously imagined.

The 32-page report said the tariffs, "if enacted, will only harm American consumers, households, workers, businesses, organizations and governments at all levels. Inflation and poverty will spike."

The industry association gave a detailed list of products, with the potential impact from tariffs under two of the different scenarios Trump has proposed: one, which the CTA called the 10%/70% scenario, would see 10% tariffs on all imports, coupled with an additional flat 60% tariff on Chinese goods (on top of the current 10% tariff on imports from China), while the other would see 20% tariffs on all imports coupled with flat 100% tariffs on goods made in China, which it dubbed the 20%/120% scenario.

But the report points out that either way, "across the board, the tariffs will cause significant price increases for U.S. consumers" and that laptops and tablets are likely to jump in price by 46%-68%, videogame consoles by 40%-58% and smartphones by 26%-37%.

The report also said that flat tariffs, ranging from 60% to 100% on all imports from China, will simply serve to move production out of China and into other countries, without the hoped-for impact of moving production to the U.S.

"Reshoring all tech manufacturing to the U.S. isn't feasible. And U.S. consumers will still have to pay more to buy these products since U.S. retailers will have to pay the 10%-20% tariffs to import them from non-Chinese sources," the report predicted.

Under the 10%/70% tariff scenario, the average retail price for a smartphone would jump by $213, the CTA said. That means that U.S. companies like Apple Inc. $(AAPL)$ would be expected to raise prices to avoid a massive hit to their profit margins, unless the company receives a tariff exemption, as it did in the previous Trump administration. Alphabet Inc. $(GOOG)$ $(GOOGL)$ has moved much of the production of its Google Pixel phone to India, but importing from other countries would still carry a 10%-20% levy. Currently, smartphone imports to the U.S. are duty-free, and none are manufactured here, the CTA said.

The report said the PC industry would also be hit with vastly higher prices, just as it is trying to interest consumers in buying PCs with AI features, like Microsoft's $(MSFT)$ Copilot. Many of the CES announcements from chip makers such as Intel Corp. $(INTC)$, Advanced Micro Devices Inc. $(AMD)$ and Qualcomm $(QCOM)$ were about how many PC makers are employing their chips for new AI PCs.

But the levy on laptops is expected to be even higher than it is on smartphones, with an average price increase of 45%, or about $357, in the same 10%/70% scenario. Tablets, too, would feel the pain, with expected price hikes of about $201. That would likely hurt U.S. companies like HP Inc. $(HPQ)$ and Dell Technologies Inc. $(DELL)$, which sometimes battle over price when the PC market gets tough. Those PC makers could either face deep hits to their profit margins or impose price hikes of nearly 50% if the CTA estimates pan out. Standard desktops, however, are expected to see only a 7% increase in price, about $70, in that 10%/70% tariff scenario.

The CTA predicts that the proposed tariffs would also impose a substantial burden on American consumers, reducing their spending power by $90 billion to $143 billion annually.

It's feasible that Trump may change his mind on the proposed tariffs, or include some industry sectors as exemptions, as he did before. But if the estimates by the CTA are anywhere close to the truth, the tech industry is probably going to wish that those tariffs would get buried in the desert, as so many problems in Las Vegas used to be.

-Therese Poletti

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January 09, 2025 19:01 ET (00:01 GMT)

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