Why Tariffs on Chinese ICT Imports Would Harm the U.S. Economy

Raising the cost of ICT products by levying tariffs on ICT imports from China would reduce growth in U.S. ICT investments, which would lower productivity growth, and thus economic growth.

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 technologies (ICT) imported from China should not be one of them. ICT represents the largest source of U.S. economic growth—accounting for up to 50 percent of U.S. GDP growth over the past 10 years.  Artificially raising the cost of ICT products by levying tariffs on ICT imports from China would reduce growth of U.S. ICT investments, which would lower productivity growth, and thus economic growth. ITIF estimates that a 10 percent tariff levied on Chinese ICT imports would slow the growth of U.S. output by $163 billion over the next 10 years, and a 25 percent tariff would slow output by $332 billion. For the average American household, this slower economic growth would mean $150 to $306 less income in year 10. While the Trump administration’s goals of confronting China’s unfair trade practices and reinvigorating U.S. manufacturing are commendable, applying tariffs on ICT imports would needlessly harm the U.S. economy.

Why Tariffs on Chinese ICT Imports Would Harm the U.S. Economy