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- Hey, I'm Ashley Belanger, senior policy reporter for Ars Technica. With me today is Ed Brzytwa, vice president of International Trade for the Consumer Technology Association. All year, the CTA's been monitoring how tech companies are responding to Donald Trump's tariffs. And their research helps everyone better understand when to start worrying about prices of popular consumer tech products from smartphones to video game consoles, when those prices might be going up. I can say that the CTA's research has helped me monitor the constantly shifting situation, and over the next few months, several factors could be influencing tech companies' forecasts in new ways. Chip tariffs could come any day, companies in a lot of countries have started ending shipments into the US and court battles may even force Trump to refund billions in tariffs collected so far. Just this weekend, Trump warned that efforts to block his tariffs could cause even more economic chaos. And for tech companies, it remains hard to predict what tariffs could be added or removed next. I've got a bunch of questions for Ed, but if you also have burning questions, just drop them in the chat. Ed will be answering viewer questions at the end of the session. Thanks again for being here, Ed. Let's start with what you're seeing now.

- Yeah, thank you Ashley. It's a really pleasure to speak with you and the Ars Technica audience today to talk about tariffs, which we are talking about that every day.

- Yeah. I'm super appreciative to have your insights as always. How have tech companies responded since Trump's tariffs began taking effect earlier this year?

- So we've been telling our member companies at CTA about the possibility of tariffs for a long time. I mean, really dating back into the beginning of last year. And you know, we did a lot of educational webinars for our members, what we call virtual round tables. We did research on the basis of the Trump campaign's policy proposals on what was then called a universal baseline tariff. And then the focus then that point in time was on China. So our companies kind of knew vaguely what was coming, even if they didn't wanna believe it. But the reality has been a lot more difficult and far worse because of not just the height of the tariffs, but the variability, the tariffs on, tariffs off. There's the exceptions, the randomness of some of the tariff actions on certain trading partners. Like how high the tariff rates are, just, you know, based on a formula that was concocted in the White House. So some of our members just kind of froze, right? They didn't know what to do, especially if they wanted to import in the United States, what was the tariff rate going to be? They may have said, well, maybe it's worth it for me to wait a while.

- Yeah.

- See if things clear up. And, you know, some companies said, "Well, I'm gonna ship production to another market." You know, maybe they would get a better deal if they went to that market versus another market. So it's all over the map, Ashley, because everyone is in a different situation.

- Yeah. And you know, the deals that Trump was striking or attempting to negotiate with various countries over the summer, those deals, I know a lot of people were hoping would provide greater certainty, but would you say that the administration's deals with trading partners so far have provided any greater certainty for tech companies?

- So you have to keep in mind that for the technology sector, up until this administration on a global basis, we had tremendous certainty that tariffs were gonna be very, very low because of what is called the WTO, Information Technology Agreement. And the expansion of that agreement in 2015, which zeroed out tariffs on a wide range of ICT products, other technology products, largely inputs into technology, manufacturing, some finished goods. So the introduction of these US tariffs under the International Emergency Economic Powers Act created tremendous uncertainty. And still creating this uncertainty. So these deals, let's just say with the EU or with Japan or Korea or with others, if you wanna call 'em deals, they're still under negotiation, right? Yeah.

- They aren't binding trade agreements like we have with Canada and Mexico, and even that's in question at the moment. They're bringing certainty about potential tariff rates. So if it's universal for that country, like 15% for the EU with the most [indistinct] rate included, that's certainty, right? but it's not all the certainty because there's these other tariff actions that could come down the road through the Section 232 of the Trade Expansion Act of 1962, which is national security related. And the administration has done investigations on a whole range of products, including semiconductors, for example. And that could lead to more tariff rates on a global basis going forward. So we just don't know at the moment what is going to happen.

- Yeah. And I know because of the way supply chains work, that ship tariffs could become a key pain point for some tech companies at least, down the pipe. I'm wondering how might coming semiconductor tariffs impact tech companies in the short term when they eventually drop.

- So it depends on what you mean by a semiconductor, first of all, [Ashley laughs] because for the administration, they may have a very broad view of what a semiconductor is. There was a memorandum, presidential memorandum from April 11th that said, "For the purposes of the IEEPA reciprocal tariffs," so these are the country tariffs that I'm talking about, semiconductor meant all these additional downstream products in the consumer technology supply chain. So like laptops, tablets, smartphones, many, many other types of products. So what the president was essentially saying is that he believes those are semiconductors. When they're not semiconductors, they contain semiconductors. So for now, anyway, until this investigation on semiconductors concludes, those HTS codes, those harmonized tariff system codes are accepted from IEEPA reciprocal tariffs, which has provided certainty for our industry. But we don't know where this investigation's going to lead, how broad the scope is gonna be. Are they gonna tariff the finished goods or just the semiconductor content in those finished goods? Would the remainder of the finished goods be subjected to the IEEPA reciprocal tariffs? So there's so many questions. And then you get to the point where with the other Section 232 investigations like the copper or steel and aluminum or critical minerals, how do those apply? So it's still uncertainty.

- Yeah. Yeah. And the long term in terms of like building out the supply chain and having kind of that expectation for the chip tariffs, having those questions unanswered, I would assume would only be further setting things back long term. Is there any way to even guess at what the impact could be long term of coming semiconductor tariffs?

- So what we don't know is what the tariff rate's gonna be. And so for some products it's 25% under a certain Section 232 actions. But for steel and aluminum it's 50%. For copper, it's 50%. The president himself has said a hundred percent for semiconductors or even as high as 200 or 300%. And so that's prohibitive. I mean, at a hundred percent it's prohibitive. At 200 and 300%, you're not gonna be able to import anything.

- Yeah.

- That's just a wall at that point, it's a tariff wall. And so is it again, just on the content, the semiconductor content versus the finished good, maybe that changes things to a certain extent, but it's impossible to plan for the long run if you don't know what the tariff rate's gonna be or how the tariff will apply.

- Yeah, I feel like one ray of light may be that, I feel like there was an acknowledgement during the tit for tat retaliations with China that just like, that was like untenable. So I hope that a similar, a similar expectation could potentially apply if they do go as high as 300% on chip tariffs. Well, just gonna take a second because we're halfway through my questions to just remind everyone if you've got chip questions or any other questions for Ed, you can post them in the chat at any time and we'll get to as many as those as we can at the end of the session. But this might be everybody's biggest question, Ed, do you expect Americans to start seeing more price increases from tariffs ahead of the holidays?

- So at every inflection point where a tariff has been threatened or announced, you've seen a lot of companies trying to bring as much product into the United States as possible before the tariff is enforced.

- Yeah.

- And so that's a phenomenon that is called front loading. You could also say forward purchasing, right? You're just trying to avoid the higher tariff. And so my understanding is that many companies have tried to build up as much inventory as possible to keep costs for consumers down.

- Yeah.

- Now there's a real question here as to what happens when that inventory disappears and when does that inventory disappear?

- [Ashley] Right.

- And so the administration has taken some actions to provide more room for front loading, if you will.

- Gotcha.

- But after August 7th, when these new higher reciprocal tariff rates came into effect, that may have caused different behavior. And we we're gonna find out over the next several months where maybe that front loading stopped because no one wants to pay those higher tariff rates. You know, again, we don't know what the 232 tariff rates are gonna be. So maybe there's some front loading still happening where companies are saying, "If the tariff's gonna be a hundred percent, "we'd better get our products in now "before that tariff hits." So it's a real time situation. Like when I talk to some people in the shipping industry, you're seeing shipping rates go down again because there's just not as much demand. So a lot of front loading may have already happened.

- [Ashley] Okay.

- So for the time being through the holiday season, we'll see what happens. And again, it's gonna be product specific and country specific too.

- Yeah, that makes a ton of sense. I know you had been at products across the board, or CTA had published research early on warning about, you know, potentially 25% increase in smartphone prices or like maybe even close to 50% increase in game consoles. And so I didn't know where we were now at the current point with tariffs, if we were still looking at those kinds of potential spikes or if anything had shifted since that research. Is that something you might be able to help me understand?

- Sure. Look, that that initial research that we did, we made some assumptions because imperfect information. One of those assumptions was there would be full pass through. And that was on the basis of campaign proposals. When we issued our most recent iteration of that study, it was on the basis of actual tariff rates that the administration had imposed or said like in an official document that we're going to impose. But then things changed again. So it's really hard to keep up with all the changes. So we're taking a beat to see, you know, what might come down the road next. But I think for some of the products that were not accepted from the EPA reciprocal tariffs, the impact could be much, much higher. And we did a separate white paper on this saying, okay, so there's about $338 billion worth of consumer tech products that are accepted from IEEPA reciprocal tariffs, but there's another 422 billion that are not. And so they are subject to higher rates potentially right now. And there's some good examples of companies now, particularly like in the video game area where the companies have said, "We're gonna have to raise prices." I've seen this in laptops and tablets too. And again, it could be product specific, it could be dependent upon where the sourcing is happening. And you know, this is gonna be an evolving story. It's not happening all at once.

- Yeah. There's just so many moving pieces. And now I will admit this question is more for me as I try to understand the global politics at play. Again, I just appreciate your perspective on all of this. China has been the prime target of Trump's tariffs and a major objective of the trade war is to force changes in China's behavior. But in the past, the CTA has found that tariffs don't change China's behavior. So is anything different with Trump's trade war this time around that you're seeing?

- It's a vastly different operation. Now, you have to keep in mind that the purpose of the IEEPA reciprocal tariffs largely is to address the... This is the words of the administration to address the historically high trade deficit the United States has. So what that means is that we are importing more than we are exporting. It doesn't have anything to do with the US budget deficit. People get this a little bit confused. So I wanna make sure people understand that, that we're talking about the trade deficit. Now we've had a trade deficit of varying amounts over the decades, but the US population has also grown. And we are a wealthy economy and we tend to buy more things and people invest in the United States too, which also may drive it. There's a whole body of economics around the trade deficit. But it's not necessarily a metric of the ill health of the US economy, despite what the administration might say. So we also have to keep in mind that the administration wants to use tariffs to gain a lot of revenue. And we know at the Consumer Technology Association that foreign governments and foreign countries are not paying the tariffs. It's importers in the United States, including retailers, including, you know, companies that are manufacturing the United States. When they're importing the product, they are paying the tariff to the US government that they pay the tariffs, not someone outside the United States.

- [Ashley] Yeah.

- So I think the biggest difference here is that the administration is focusing on the whole world versus just China. And they are focusing on China to a certain extent through one particular measure. It's IEEPA tariffs with respect to fentanyl, but China's also caught up in the broader IEEPA reciprocal tariffs too. So is the administration also trying to change the behavior of other governments on trade issues? In theory, yes.

- Yeah.

- They're trying to get other governments to make changes to their trade regimes. So those measures, whether they're regulations or laws or other types of measures are less discriminatory against US exports.

- Yeah.

- So that seems to be a very strong focus for the administration. And they've asked for comment from stakeholders. We've supplied comment to the administration to identify trade barriers. However, actually, we think that if you're going to address those barriers, and let's say another government removed its trade barrier, then the tariffs should be, they should come down, the United States government should provide tariff relief. It's a trade off.

- Yeah.

- Progress on addressing barriers, lower tariffs that would benefit the US economy and US consumers.

- I see. See, yeah. It's really just like been this uncertainty of like the tariffs being on and off and then like when they do go away, they aren't necessarily like, we didn't solve the problem yet. That's how I'm parsing that.

- No, we haven't solved the problem yet. And you have to keep in mind for many governments, I mean these are domestic issues, political issues for them. And they have to make tough choices if they want to address the barrier or not. And you know, for them it might not be a barrier, but for us in the industry, like yes, we think that the measure is perhaps discriminatory against US commerce.

- Yeah.

- So China, in my view, and we've been public about this in our comments to the US government, didn't change its behavior on IP theft or forced technology transfer as a result of the Section 301 tariffs. Those practices still exist in China. So, you know, there could be change in China in the future because they decide it's in their own interest. Same with these other governments. They decide, well, maybe these measures are too burdensome on our own economy, that we need to change because it's in our own interest. You would want to promote that kind of virtuous conversation amongst governments as opposed to everyone just putting walls up around themselves, either through tariffs or other types of measures.

- Gotcha. Well, as always, you've given me a lot to think about. Does the CTA have any upcoming research to help the public understand how tariffs could harm the consumer tech industry?

- Well, like we talked about before, there's so much uncertainty right now that we need a little bit more, we need a better understanding of what the tariff rates are going to be in like a month or two.

- Yeah.

- We do new research and we're making those adjustments in-house- coming up with new scenarios that might reveal what the impacts are gonna be. Like who bears the burden of the tariffs, you know, what the long-term ramifications are gonna be for consumer technology companies when it comes to lost sales because of potentially higher prices due to the tariffs. So it just depends on what the rates are. And we still don't know what the rates are gonna be at the end of the day. I mean, we've got the country specific rates, but for us, like I said, the semiconductor 232 investigation, that is the big one that has to come to conclusion before we really can do any further research. And I would say the critical minerals one is also really important because the scope of that can be tremendously large. 'Cause there's critical minerals, rare earth elements and lots of things that go into consumer technology products that make them work and make them function in a high level. And if there's tariffs on those, that might have a ramification on the health and the future of the industry as well.

- Gotcha. Well, if they ever do decide what to do with the chip tariffs, it's like they keep saying next week, next week, it feels like that keeps happening. And I'll keep an eye out for the next studies on semiconductors and then certainly be interested in following your research on the critical earth minerals. But assuming the current tariffs stay in place and that the administration introduces more tariffs, what does the CTA recommend to the administration to avoid the worst possible impacts?

- Look, there's many different things the administration could do. First of all, stacking. Stacking is a term that has come into vogue in the tariff world, what that means is one tariff action sits on top of another tariff action. And so instead of just paying 25%, you're actually paying 25 plus maybe another 25 plus another 10 or whatever the tariff rate is, so like, let's put this into concrete terms. Let's say the tariff rate for a product coming from India now is 50%, is there gonna be a Section 232 tariff that also applies? And would that sit on top of the 50%? Is it 50 plus a hundred or 200? What if in that semiconductor there's also a tariff on polysilicon? Do you also have to pay the tariff on the value of the polysilicon? What if in that downstream product there's steel or aluminum, you also have to pay the tariff on those products. So the tariff stacking could be very, very complicated. And we think the administration is gonna roll out even more of these actions and investigations going forward, especially if they're worried about losing the IEEPA tariff authority if the US courts, you know, continue to determine that the imposition of the tariffs was illegal. I know, it's a lot.

- Like, yeah.

- Complicated.

- I couldn't--

- And there could be Section 301 investigation. So like tomorrow, for example, I'm testifying at a hearing on Brazil, and the office of the US trade representative is doing what, what is called a Section 301 investigation on Brazil's discriminatory acts policies and practices across a range of areas in the industries. And this is the same tool that the US government used in Trump 1.0 on China, that investigation on China's practices. So, you know, there could be more of these types of country specific investigations in the future if the administration loses its IEEPA tariff authority.

- So it could be a long four years of just what tariffs will be coming next.

- Lots of public comments, lots of comments and hearings.

- Wow. Well, this has definitely been informative. I think we definitely have time for a few questions. I see we have one asking, "Sorry, isn't this just setting up a huge own goal "against the US?" Atal says, "Historically tariffs are a hundred percent "loser every time, every era, no exceptions. "Would you say the US is risking setting up a huge "own goal with prolonging this kind "of tariff strategy the way Trump has?"

- Look, as an analyst, I have a long thought that creating a higher tariff while around the United States is not in our long-term national interest. And this is because tariffs are attacks on importation, and it creates a higher cost economic environment in the United States, particularly for manufacturers. There might even be a spillover effect into the services sector, mainly because services companies have to buy physical products in order to operate their businesses. So the ramifications of a tariff regime like this, we're in the early game of understanding what those are. And so would this be an own goal potentially, where the United States economy is just less competitive and the rest of the world moves on and they continue to lower the barriers to trade to each other and they integrate, and the US is on an island? That's not in our interest. So I think we have to be very concerned and have a conversation about whether tariffs really are going to improve US manufacturing or to create a stronger United States. It may actually be the opposite, that by lowering our barriers to trade, we create a stronger economy.

- Yeah. That does kind of tie into another question we got, which is just, if the goal is to bring manufacturing back to the US, what would you say would be a realistic timeline for that? Is it years, decades, or is it even feasible, would you say?

- Again, it depends on the industry and the product. For some industries, the idea that you're going to make everything in the United States tomorrow is not feasible. It will take years if not, you know, a half decade or a decade or more. And even then, it's not a guarantee that you're gonna be able to make it work, especially if you're putting high tariffs on all the inputs that go into manufacturing. So it's a bit of a conundrum.

- Yeah, and maybe if you can answer this granularly, do tariffs on downstream products that just contain chips risk double taxing the same supply chain? I'm assuming that this is a question that has to do with like, when chip tariffs come?

- Potentially, yes. So what we've been calling it is a possible triple whammy.

- Wow. Think about the chip. Now, what is a chip comprised of? One of the primary materials is polysilicon.

- [Ashley] Right.

- So if you're importing the chip directly, and there's a polysilicon tariff, are you also then having to pay the tariff on the value of the polysilicon in the chip? Let's just say you're importing a downstream product that contains chips. So are you also then both paying the tariff on the value of the semiconductor and the value of the polysilicon and potentially the value of the copper that's in the product because copper conducts electricity?

- [Ashley] Yeah.

- And we're talking about consumer electronics products or if there's critical minerals tariffs, are you also paying the tariff on the value of those inputs or steel aluminum, if the casing is made out of aluminum, are you paying the tariff on the aluminum semiconductor, the copper, the critical minerals? Where does it stop? We don't know. So triple whammy might be an understatement.

- Wow. Okay. That's an easy way to think of it also sounds like a nightmare.

- It's a bureaucratic nightmare, perhaps by design. We don't know. Is it to encourage people not to trade? Maybe?

- Yeah.

- To try to find domestic sources so they don't have to deal with the rigamarole of importing that the administration has created.

- Well, one of the things that a lot of people bring up when it comes to these tech company impacts is what is the threat to innovation? And Mario, Mario Grina, thanks Mario for the question. He was wondering what your thoughts are on a quote today from the New York Times. I'm just gonna read this to you. "Experts suggest that now Trump's chip tariffs risk "not just spiking prices, "but throttling AI innovation in the US "just as China's open source AI model "shake up markets globally." Do you have any thoughts on where we're headed in terms of this potentially throttling AI innovation?

- Look, if the goal is for the United States to be the most competitive market in the world, the most powerful market in the world on AI innovation, we need to be very clear-eyed about not adopting policies that undermine that goal and identifying the policies that are currently in opposition to the goal and then getting rid of those policies. So it's the same thing, if it's about competing with China on anything, you would think that not imposing tariffs on our allies and our friends around the world would be helpful in achieving that goal of competing with China more effectively instead of pushing them towards China.

- Yeah.

- And so it is difficult to understand how all of these policies are supposed to work together. It seems like there's a lot of policy friction and overlap and pulling and tugging. So I would say that for our goal as a society should be to promote innovation, across the board, and to make innovation as low cost as possible, to allow anybody in the United States to come up with a new idea and to scale it up and bring it to market. And if we put in place tariffs across the board, people are just gonna be focused on making their tariff payments and saving up money to make those tariff payments as opposed to building out a product that is great for the US market, great for consumers, solves problems, solves societal challenges, and brings us to a better tomorrow.

- Yeah. You know, another viewer question, they make another good point, which is "Just how much leverage does the US really have "with tariffs considering how China controls so much "of the upstream materials and manufacturing capacity?" Would you say that the leverage that we're seeing so far through this, or would you be able to quantify how much leverage the US has with the tariffs fight?

- It's difficult to quantify. Look, I mean, I think if there's a goal that the US government has to create stronger supply chains for certain types of national security goods, like let's just say critical minerals, again, you should be able to work with our allies to create those stronger supply chains and value chains outside of China. So we know that Canada and Australia and others are able to supply critical minerals with the right investments. Maybe they're able to process those critical minerals. I mean, it can't just be a tariff solves all of life's problems. That's not gonna work. You need other types of measures. You need better permitting, you need better approaches to infrastructure into the workforce and to respect intellectual property rights to uphold the rule of law and create better trade facilitation measures between our allies, the tariff by itself isn't going to achieve those goals.

- Yeah. So I am wondering, you kind of had discussed how tech companies are reacting to potential chip tariffs coming soon. And do you see companies stockpiling chips as like a hedge right now? Or is that maybe too expensive or risky given how fast the tech cycles are moving?

- So there are two different scenarios here. There's the companies that need chips to make things in the United States. So I think a lot of those companies lived through the pandemic. They came out of it with an increased understanding of how important it is to have supplies of chips. So I can't speak for any of those companies, but I think from a behavioral standpoint, I would anticipate a lot of companies tried to bring as many chips in the United States as possible in order to get out ahead of the tariffs. So when you're talking about the downstream products that have semiconductors in them, that is perhaps a much bigger concern for consumers. Mainly because at some point the companies are gonna move on to the next set of product cycles where maybe the chips in the products in the future, maybe they're not gonna necessarily be made in the United States because there's not enough production yet. So, you know, maybe over time that production exists. So if those tariffs exist on the semiconductor content, the importers are gonna have to pay the tariffs. Again, we just don't know what the semiconductor tariffs under Section 232 are gonna look like.

- Wish we knew.

- I wish we knew. I mean, this is the question I get asked all the time. It's like, what is it gonna look like? And you know, it seems that for the president anyway, he's made remarks about, well, if you're making a fab in the United States, you're trying to build that fab, or if you're, you know, close to launching production, you might avoid the tariffs for a while, but as soon as you get to production, then the tariff comes on. So that's what he's talking about. Whether that is what it actually happens, we just don't know.

- Yeah. Gotcha. Well, this has been such an awesome session. I think we have time for one more question, and it's maybe an unexpected one, Ed. Kristen Van Fleet wants to know, "What are the three books on display behind you? "In addition to these, are there other books "or podcasts you would recommend to better understand "tariffs' effects on tech and other financial markets?"

- Well, actually I have a much bigger collection of books at home, which I should have brought in today. This is just like a small sample, but the one I will point you to is "Chip War" by Christopher Miller, a professor at Tufts. And if you wanna know about the semiconductor industry, its history, how it started in the United States, how the intellectual property is from the United States, how other countries have engaged in the semiconductor industry, read this book. It is one of the best books I've read about a particular industry in a long, long time. You know, I have a book on my shelf at home that I have been meaning to read for a long time by Professor Douglas Irwin, and he's a trade historian, so if you wanna do a deep dive into US trade history, he's also a great author to read.

- Rad. Well, thanks for the book recommendations and all the insights today and thanks everyone for joining us. This has been awesome, Ed. I hope once the chip tariffs drop, we can be back in touch to find out what happens next and everything that comes after that. So thanks again. Yeah.

- My pleasure, Ashley. It's been a fun conversation and I know we'll have a chance to do this again in the future.

- Cool. Alrighty. I believe we should be cutting off soon. [laughing] Thanks everyone.

- Thank you. [energetic music]