Broad Tariffs on Chinese ICT Products Would Impose Significant Costs on U.S. Economy, Says Leading Tech Policy Think Tank
WASHINGTON—As the Trump administration prepares to take action against unfair Chinese trade practices under its Section 301 review, all options, including tariffs, appear to be on the table. But applying tariffs on information and communications technology (ICT) imports should not be one of them, according to a new report released today by the Information Technology and Innovation Foundation (ITIF).
Broad tariffs on Chinese ICT products would cost the U.S. economy $332 billion over the next 10 years if the tariffs were set at 25 percent, like those recently announced for steel, the report finds. If such tariffs were set at 10 percent—the same as those recently announced for aluminum—it would cost the U.S. economy $163 billion over the next 10 years, according to the report.
“The Trump administration’s goals of confronting unfair Chinese trade practices and reinvigorating U.S. manufacturing are commendable, but we need to ensure that any penalties on China’s trade actions are not penalties on the U.S. economy,” said ITIF Vice President Stephen Ezell, lead author of the report. “ICT products are critical capital goods that drive productivity growth in most U.S. goods and services industries. Imposing tariffs on ICT would reduce ICT investment, decreasing U.S. innovation, productivity, and competitiveness. And because of the nature of global ICT supply chains, they would do little to help U.S. ICT manufacturers.”
ITIF’s report models the potential economic impact of applying tariffs on ICT imports from China—a category that includes everything from computers and smartphones to routers and chips. The report shows how tariffs would increase ICT prices, decrease ICT investment, and reduce the growth of America’s capital stock of ICT over time, which would, in turn, reduce productivity and economic growth.
“The Trump administration is right to undertake a comprehensive review of America’s trade relationship with China. China’s mercantilist policies toward innovation industries are the greatest trade threat to both America’s economy and the global trading system,” Ezell said. “But any steps to pressure China to finally live up to its WTO commitments must be steps that help, not hurt, the U.S. economy.”
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The Information Technology and Innovation Foundation (ITIF) is an independent, nonprofit, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. Recognized by its peers in the think tank community as the global center of excellence for science and technology policy, ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress.
