Trump Plans To Impose New Tariffs On Imported Electronics Could Chill US Pro AV Sector
November 26, 2024 by guest author, Florian Rotberg
Guest post: Florian Rotberg, Invidis
Despite the current USMCA free trade agreement that Donald Trump signed with Canada and Mexico during his first term in office, the president-elect plans to impose new tariffs of 25 percent on all imports from Mexico and Canada, and an additional 10 percent on all imports from China.
The newly-announced tariffs could significantly impact the digital signage industry in the US, as more than 50 percent of displays, LEDs and media players are either imported from China or assembled by manufacturers in Mexico. Many digital signage hardware manufacturers have opened factories in Mexico in recent years to take advantage of the free trade zone between Canada, the US and Mexico.
Currently, electronics products for commercial use imported into the United States from China are subject to a 6 percent tariff, while products from Mexico are duty-free. Unlike cars and other categories, electronics products have so far been spared from punitive tariffs imposed by the first Trump and Biden administrations.
An additional tariff of 10 percent on products from China and 25 percent on products from Mexico would have a significant impact on the prices of digital signage hardware in the United States. These are the largest importers of electronics into the United States, according to 2019 data from the U.S. International Trade Commission .
- China 34.5%
- Mexico 17.4%
- Malaysia 6.2%
- Taiwan 5.5%
- Vietnam 4.7%
- Japan 4.5%
- Germany 3.5%
- South Korea 3.5%
- All other countries 20.2%
According to experts, new tariffs on imports from the United States’ three largest trading partners would significantly increase costs and disrupt the economy in all economies involved.
LCDs and LEDs in particular are not currently manufactured in the USA. Local production lines could be set up in the foreseeable future, but the main components would still have to be imported from China. Alternatively, Samsung, LG and Co. could start shipping from their factories in Vietnam, Indonesia, Malaysia or even the EU. Selected Chinese LED manufacturers already ship their hardware from the EU to the USA, as “Made in China” is becoming increasingly difficult to identify. But diverting production facilities to the USA – the largest digital signage market in the world – would impact the supply and prices of digital signage in the rest of the world as well.
Stratacache CEO Chris Riegel has started building a local LED assembly facility on the US West Coast in Oregon, but is still waiting for certain assembly machines to arrive. Demand for LED assembly tools is very high, especially from automotive suppliers.
If Donald Trump follows through on his announcement after his inauguration in January, the digital signage industry could see significant price increases across most hardware categories. The impact is already being felt, with ports in Europe reporting a 40 percent increase in container shipments to the U.S. since the election. Goods likely to be affected by new tariffs are shipped to the U.S. from Asia, but also from distribution centers around the world to replenish inventory, so the impact on hardware prices could also be felt outside the U.S.
Like all trade/tariff salvos, these new tariffs would have not just the immediate effect based on the math outlined, but could of course cause many ripples not the least of which is more tariffs launched by a multitude of countries to compensate, negotiate, retaliate. Let’s hope cooler heads prevail before this new U.S. salvo is launched.
It’s ironic that NAFTA was initially crafted to create a huge, synergistic free trade union for all of North America/Mexico, but many events have altered the landscape. Since its launch the entry of China into the WTO and the subsequent huge rise in Chinese and other Asian manufacturers and their native governmental support caused the equation to change – and much of that change has been good for our industry. But my point is that the original NAFTA math was pushed sideways (even putting aside newer political currents).
If new tariffs are launched as the new administration warns, it could be that the most or probably all of the big AV display manufacturers will be swimming in the same waters, with no single one of them gaining any advantage. If that happens we’ll see what new price elasticity of demand curves look like for product categories as a whole, if all product prices go up in tandem regardless of the manufacturer. It might be that displays, today sold at very low margin, might weather the storm and end up being repriced upward in ways that might benefit the industry in the longer term. (Economics 101: prices are sticky upward… but I wouldn’t want to have to test that textbook math…)
Mexico is such a vibrant manufacturing center today, with so many factories at higher efficiency levels than most competing countries (including many U.S. factories) and stellar R&D and workforces for everything from cars to LCD screens and more. Having lived in Mexico, I’ve toured some of these factories, and it’s so clear these are not factories with just “sufficient” capabilities, they’re amazing technology centers in the very top tier of advanced manufacturing worldwide, period. So it’s a shame that politics is further eroding the original intent of NAFTA, which held so much promise for our industry and many others. Let’s just hope enough technology companies and end users and their representatives will steer the new administration to thoughtful, purposeful policy approaches – and harness the combined talent and resources the U.S., Mexico, and Canada can offer in abundance, working together.
Nice article Dave. Added to my running article. B2B will hit consumers for sure. NRF issued dire report yesterday as well. Definitely a developing story as we say. https://kioskindustry.org/business-impact-digital-signage-kiosk/
My advice to my 100 Shenzen providers is “sell as much as you can, as fast as you can”. Executive orders by Trump likely issued first week of Feb.
The reason tariffs are going on is because many countries have been dumping every product they can produce into the United States market. Often at below cost. Complaining about this is the equivalent of buying stolen goods from a fence, and then complaining because your fence is no longer available. And at the same time because of the dumping, industries here cease to exist.