From Bloomberg:
President Donald Trump’s administration exempted smartphones, computers and other electronics from its so-called reciprocal tariffs, representing a major reprieve for global technology manufacturers including Apple Inc. and Nvidia Corp. even if it proves a temporary one.
The exclusions, published late Friday by US Customs and Border Protection, narrow the scope of the levies by excluding the products from Trump’s 125% China tariff and his baseline 10% global tariff on nearly all other countries.
The exclusions apply to smartphones, laptop computers, hard drives and computer processors and memory chips. Those popular consumer electronics items generally aren’t made in the US.
One estimate (Barron’s) indicates the exemptions cover $385bn (2024) worth of imports. Assume all of the imports were from China and extended for a year with no quantity response, that would reduce the tariff burden by $558 billion[better estimate $84 billion from China, rest from RoW, so $169bn]. Of course, as noted by Bloomberg, the reprieves will likely prove to be temporary, albeit the end-tariff rates at lower than 145%. (The actual amount of revenue obtained if the 145% tariff were in place for an entire year would be lower due to the reduction of import quantity, which depends on the price elasticity of electronics imports).
So, policy uncertainty remains (at record) high:
I wonder if the market response had more to do with investors (and their machines) taking the felon-in-chief’s announcement as evidence that he could be spooked into backing down – reason for hope – than an actual improvement in the economic outlook.
When the likes of Jim Bianco start seeing evidence of a Treasury market rupture, it’s time to freak out. I doubt anyone knows whether an average tariff rate of 20% is actually less damaging in the short run than a 25% tariff rate, or whether a 145% rate on China is more damaging than a 125% rate. We’ve simply never been here before.
The phones and electronics thing is more evidence of felon flexibility, so more reason to hope the felon will continue to back down. He just needs lots of sucking up; look at his demand that Xi call him, rather than the other way around. Problem is, Xi has dynastic aspirations which might make his reactions more complicated, and less conciliatory, than most others.
I don’t believe that Xi is willing to lose so much face to Trump and the U.S. China wants to be #1, and its economy, sad shape though it may be in, is not that far behind the U.S. economy. Given that, I can’t see him folding, especially after Trump folded on the PCs and phones. All Xi has to do is wait.
This isn’t just crazy, this is total banana republic stuff.
In fact I would say that as of last Wednesday, when apparently many $$$Billions were made (and lost) due to advanced insider trading on knowledge of the Idiot King’s first reversal, the US officially became a Banana Republic. Who on earth of sound mind would voluntarily trade in such a country’s corrupt markets?