What to Keep In Mind
A twenty-five percent tariff on electronic components won’t express the same percentage on the increase of your final production cost. Some estimates put the abrupt price increase within a 3% range for relatively low-to-average-volume manufacturing but should tariff proceed to affect potential components like integrated circuits. There are high chances the estimations will increase.
Components made in other countries like Hong Kong and Taiwan won’t be affected by these tariffs as they are not in any way subjected to it. Hence, all components from these countries should still maintain their regular price.
China on the other way has promised to subject themselves to these tariffs alongside some of their own. This apparently means that tariffs made in the United States will be shipped to China.
Due to the lack of potential consumer for electronics included on the tariff list, higher prices in the supply chain could result in higher prices of finished products for consumers.
What Can Be Done?
The tariff implementation will for sure affect the PCBA industry. However, it is hard to say if it’ll come out negative or positive. It is possible to file a complaint with the federal government and the office of the United States Trade Senators. Some can also consult their senator or local representative.
How Tariffs Impact Manufacturing and the Component Shortage
Over the previous months, the most significant block in the production industry has been related to the shortage to electronics components. The main focus has slightly leaned towards the tariffs on imported items and products – and how the tariffs have caused an obvious impact on the manufacturing industry.
The current U.S. Tariff estimation is a 10 percent levy on $200 billion worth of Chinese products, which has was expected to leap 25 percent by the first of January, 2019 – plus the $50 billion worth of tariffs on Chinese products that have already gotten to record in August, 2018.
Manufacturing could shift to the U.S.
The main objective of U.S. decision of actualizing tariffs on products imported from China, was to enhance reshoring and to gain some yields from companies with manufacturing in the U.S. This was done by ensuring a less expensive products and services option, compared to other countries. As a result of the new implementation of tariffs, firms could act on just one of the limited options to maintain competition.
The one and the first option available for companies is about shifting manufacturing to the United States rather than depending on contract producers outside the country. Industries should merge with a dependable manufacturing partner that is not far from home.
Tariffs could influence the electronics component inadequacy
No one should be shocked as to the fact that tariffs could cause detrimental change in the electronic components industry. The tariffs comprise a broad range of goods in printed circuit board assembly. Not only that, it includes capacitors, resistors, fuses, relays, switches, transistors, LEDs, diodes, integrated circuits and so on.
Since the tariffs can influence all of these components, as a result of the increase in potential price, it’s possible that we notice less demand for the aforementioned components. It may be that with less demand, demand could be able to catch up with supply at the end of the day. Nevertheless, it’s not sure the situation will take the perceived route. For one, higher prices might lead to companies changing product cost and shifting this cost to potential to consumers. This could lead to a drop in demand.
Products could become more expensive for consumers
If we decide to proceed to unravel the impact of these tariffs on electronic components, it’s clear that it’ll most likely have the same effect on consumers. This is because of higher-priced electronic elements, and firms may be left with no choice than to adjust the product cost and then pass this cost to consumers. Hence, consumers may likely have to spend more on purchasing some products with imported components. Nevertheless, a 25% tariff doesn’t automatically mean a 25% higher product cost. Only the components of a product will be affected by imported tariffs.
Tariffs could hinder innovation and industry development
While the production companies have maintained a smooth and steady evolvement over the recent few years, tariffs could drastically cause an alteration to all of that. Those influenced by the tariffs may, as a result, increase prices for their goods and lose consumers to production industries who choose not to or can still bear the tariff’s scheme. This unpredictable effect can quickly transform from higher prices on products to low cash flow for investment and expansion, innovation, and at worst, lose much of their yields. This definitely has the possibility of affecting the labor force negatively.