WASHINGTON—Cloud computing is essential to many U.S. businesses and consumers, but a new report shows how the administration’s third proposed list of tariffs on Chinese imports would negatively impact many key components that make cloud computing possible, potentially undermining U.S. leadership in the industry. The report from the Information Technology and Innovation Foundation (ITIF), the world’s top-ranked think tank for science and technology policy, examines the impact the proposed tariffs would have on U.S. cloud-computing users and service providers.
“While the tariffs were proposed to counteract unfair Chinese trade practices and improve U.S. competitiveness, they in fact hurt U.S. cloud computing competitiveness,” said Stephen Ezell, ITIF vice president for global innovation policy and lead author of the report. “It’s critically important to contest Chinese innovation mercantilism, but the administration’s proposed tariffs on key capital goods imports are the wrong way to go about it. They threaten U.S. leadership in cloud computing and stunt U.S. economic growth.”
The global market for cloud-computing services is worth $260 billion today, including at least $70 billion in the United States, and it is expected to nearly double by 2020. At least 93% of U.S. businesses rely on cloud computing, and more than 3 million data centers, which play a central role in delivering cloud-computing solutions, have been built across the country, supporting jobs in all 50 states.
According to the report, the proposed tariffs would have at least four main deleterious consequences for U.S. cloud-computing leadership.
- Prices would rise for both business and consumer adopters of cloud-based solutions.
- Cloud-computing providers would have to cut costs, which would reduce funds available for investment in new hires, new expansion, or research and development leading to innovative new products and services.
- Raising costs to provide cloud services from the United States may make alternative locations internationally more price-competitive.
- Global supply chains for the manufacture of information technology products would be disrupted and wouldn’t be easily reinvented in the short-term without significant detriment and dislocation to U.S industry.
“Many Americans will feel the impacts of the proposed tariffs on cloud computing through increased prices, lost jobs, and decreased economic opportunity,” said Caleb Foote, ITIF research assistant and co-author of the report. “The administration should pursue alternative policy measures that don’t raise the cost of key productivity- and innovation-enhancing capital goods and services.”
Read the report.
