In first softening on China, US exempts phones, laptops, chip machines from tariffs

Companies like Apple, which manufacture a large share of their electronics output in China, were particularly caught in Trump’s tariff crosshairs, hit with a massive 125 per cent tariff by the US administration following an escalation in tariff rates between Washington and Beijing.

In a notification issued by the US Customs and Border Protection, the US administration has excluded 20 product categories including smartphones, laptop computers, hard drives and computer processors, chip making equipment, and certain semiconductor devices like memory chips — a substantial part of which are either made in China, or assembled elsewhere by using Chinese-made parts. The exclusions are retroactive to 12:01 am on April 5.

The fresh exemption means the electronic products, including iPhones, will not be impacted by the US tariff on China, and the baseline 10 per cent levy that has been imposed on other countries. This also brings down the effective tariff rate on Beijing.

When Trump had announced some sanctions on China in his first term, Apple had secured exemptions for its products. However, when the fresh tariffs were announced earlier this month, there was no such exemption initially, as a result of which Apple’s stock prices were battered, falling by as much as 15 per cent. But now with Trump’s partial U-turn, Apple could face a sense of ease, as it gives respite to its supply chain in China, where the company produces more than 80 per cent of its iPhones.

Since April 2, when Trump first announced new tariff rates on several countries, there have been several flip flops by the US administration, as various countries reacted in different ways to the measure – some like China decided to impose tariffs on US products, which led the US to increase its tariff rate on the country, while other like India have refrained from any tariff-related retaliation and have instead looked to secure a trade deal with Washington.

Earlier this week, the US administration paused reciprocal tariffs on 75 countries for 90 days, including India, while imposing a steep 125 per cent tariff on China in response to its retaliatory measures. With the latest US move, some electronics exports from the country to the US are safe from the tariff wars, for now.

While some in the Trump administration have said that the tariffs could lead to more manufacturing moving to the US, experts have highlighted this may not necessarily happen in several sectors, especially ones where China has a stronghold, like electronics. Several companies, including Apple, are beneficiaries of the Chinese manufacturing story, and have made the country their most important production base. That is largely due to the relatively cheap cost of manufacturing in the Asian country, while being able to find skilled people for those operations and a reliable ancillary industry.

Any hopes that electronics manufacturing may move to the US just because tariffs make Chinese exports to the country more expensive might be premature, given the significantly high costs related to manufacturing in the US. Besides, companies cannot move their supply chains to a new destination in a few months.