How would additional tariffs affect American market?

On August 14 2017, the President issued a Memorandum instructing the Trade Representative to determine whether to investigate under section 301 of the Trade Act of 1974 (Trade Act) (19 U.S.C. 2411), laws, policies, practices, or 3 actions of the Government of China that may be unreasonable or discriminatory and that may be harming American intellectual property rights, innovation, or technology development.

On August 18, 2017, after consultation with the appropriate advisory committees and the inter-agency Section 301 Committee, the United States Trade Representative (USTR) initiated an investigation into certain acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation.

After USTR’s Section 301 investigation, President Trump announced in the second period of March that the United States will impose tariffs on $60 billion dollars in Chinese goods in response to China’s policies that stealing U.S. intellectual property and abuse trade rules. He took the expected step yesterday.

The Office of the United States Trade Representative (USTR) published a proposed list of Chinese products that could be issue to additional tariffs.

“ https://ustr.gov/sites/default/files/files/Press/Releases/301FRN.pdf “

The proposed list of goods, including aerospace, information and communication technology, robotics and machinery, would point products as a target that benefit from China’s industrial plans while minimizing the impact on the U.S. economy. There are approximately 1300 separate tariff lines in this list. However, this proposed list is not taken its final shape yet.

First of all, it will undergo further review in a public notice and comment process, including a hearing. After completion of this process, USTR will issue a final determination on the goods subject to the additional duties.

USTR mentioned these comments as a summary:

“The U.S. Trade Representative (Trade Representative) has determined that the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation covered in the investigation are unreasonable or discriminatory and burden or restrict U.S. commerce.

The Office of the U.S. Trade Representative (USTR) is seeking public comment and will hold a public hearing regarding a proposed determination on appropriate action in response to these acts, policies, and practices.

The Trade Representative proposes an additional duty of 25 percent on a list of products from China. The list of products, defined by 8-digit subheadings of the Harmonized Tariff Schedule of the United States (HTSUS), is set out in the Annex to this Notice.”

If this proposed list becomes valid, how the technology prices would be affected in U.S. market?

According to many economists, global supply chain companies such as Apple, IBM, Hewlett Packard Enterprise will raise prices for American consumers. Many believes that this issue will occur strong reaction between American consumers because of the fact that they got used to buy inexpensive electronics.

Considerable amount of specialists believe that this approach will penalize U.S. consumers.

Here some of their remarks:

Brad Setser who is a former White House economist in the Obama administration:

“The pain will be very visible and the potential gains will be very abstract. The administration hasnot prepared the U.S. for the downsides of a trade war.”

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Dean Garfield, chief executive  of the Information Technology Industry Council:

“If history is any indication, these proposed tariffs will not work and will be entirely counterproductive. Tariffs penalize U.S. consumers by increasing prices on technology products and will not change China’s behavior. Instead, the administration should act consistent with international obligations and work with other countries to address systemic issues with China.”

It seems that many specialists are being annoyed with this approach.