US-China Trade War Reshapes Global Electronics Supply Chain

Article By : Daniel Browning

While the shifting political landscape and subsequent tension between America and China is no secret, the ripple effect is harder for the average citizen to perceive...

While the shifting political landscape and subsequent tension between America and China is no secret, the ripple effect is harder for the average citizen to perceive—especially when those ripples aren’t yet affecting their wallets.

With the current administration’s implementation of tariffs on certain Chinese imports, however, the corresponding tension could very well impact the average consumer in America sooner rather than later.

SEMI, an association concerned with the global electronics supply chain, has been monitoring this situation and is concerned by the possible disruption of the market—a disruption that would not only be difficult for consumers but possibly also damage global market access that is integral in retaining free and open trade.

So, how do these rising trade tensions between the United States and China affect the global electronics supply chain and how might they impact consumers? While the true answer is highly complex and dependent on a myriad of factors, we’ve highlighted the most likely scenarios below.

Consumer goods

It is now common knowledge that many different consumer goods are either completely or partially manufactured in China. This may be impactful in its own right, but the consequences of trade tensions are even more dire when you consider the extent to which our every-day lives are largely dependent on Chinese-manufactured goods. While the new tariffs are designed to omit consumer goods imported from China, such as Apple products, they also stand to impact the semiconductor industry. This could certainly be felt by consumers, because semiconductors are integral in producing essential electronic circuit components, which are found in a wide range of consumer electronics, such as your smart phone or computer.

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When the cost of semiconductors rises, the cost of electronic circuits is also likely to go up, making it likely that consumer electronics would become more expensive to produce and to buy. In other words, the average consumer may not see an immediate change, but in the long-term, the prices on consumer electronics could very well trend upward.

China’s response

While the tariffs themselves could cause substantial changes in the global electronics supply chain, China’s response to those tariffs could be the true catalyst to monumental shifts. Responses may not be limited to increased taxes and regulations on United States goods, either.

Large scale boycotts of American-made products are a real possibility. Because China’s media is state-run, a boycott could be widespread and highly effective.

China could also intentionally slow down the approval of international business transactions. This form of retaliation can have a tremendous impact on U.S. companies that conduct business with Chinese corporations. In fact, even companies that rely on Chinese manufactured goods to a small extent could face massive changes, either in price, or in reworking their global supply chain, or both.

This scenario is not purely hypothetical either, as China has used these anti-tariff tactics before. At the least extreme, consumers in the U.S. might see a slight increase in the price of manufactured goods, and corporations might have to re-work their supply chain. At the most extreme, international trade and foreign investments could be stunted for decades to come.

United States supply

While imports from China are important and certainly at the forefront of the trade tension, exports from the United States to China are also in question. Where China’s physical goods are integral to U.S. consumer goods, hardware, software, and services from the U.S. are integral to the creation and innovation of exportable products in China.

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With new restrictions in place, certain hardware, software, and service elements are more difficult to trade among businesses. This results in businesses searching for alternatives in these areas, leading to interruptions in the global electronics supply chain, a more complicated production process, and potentially higher prices on the consumer end. In short, both U.S. and Chinese businesses stand to suffer from new tariffs and heightened trade conflict.

Global impact

While the United States and China are at the center of this issue, it truly impacts the world on a global scale. While it may be difficult to predict the precise impact, as the globe continues to grow more connected and the importance of technology incraeases, the changes are bound to be felt not just in the United States and China, but worldwide. As we begin to learn more about the exact ramifications of this conflict, manufacturers will be forced to carefully examine their current supply chain. In order to sustain profitability, significant changes may be required.

Currently, the global supply chain runs through China, and some claim that China has “weaponized” its dominance. Perhaps this trade tension will weaken China’s dominance in global manufacturing. It will certainly be interesting to see if this conflict will result in a shift in power and influence global manufacturing.

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