Trade Wars, Electronics Manufacturing, and IoT
China and the US have been in the headlines for months now, for multiple reasons. One of the recurring headlines we see scroll through our feeds more and more frequently have to do with the trade war that the two have been embroiled in since 2017.
What’s this trade war all about and what kinds of effects does it have on the global IoT and electronics manufacturing industries? All politics aside, this article will (as briefly as possible) outline the economics of the current US-China trade war, its effect on IoT & electronics manufacturing, and go into possible ways for us to steer clear of the trade war all together.
Outlining Potential Disaster for Electronics Manufacturing
To define the reasons behind a trade war could be an entire blog series by itself, but let me try in a single and easy to digest paragraph.
Essentially, this trade war stems from the economic and monetary facts that the United States exported $130 billion in goods to China in 2017, while imports from China were $506 billion. Let that sink in for a moment, it bears repeating that the US sold $130 billion to China but bought $506 billion – this is what’s called a ‘trade deficit’ (and a very large one at that). Secondary to the glaring trade deficit, accusations have come in from both countries regarding trading and practice – the US says China has IP theft issues and unfair trading practices and China says that the US is trying to stop their economic rise. There may be a few more reasons in the mix, but for all intents and purposes of this article the trade deficit and the accusations are to blame for this trade war. The two countries economic relationships have understandably been going downhill since 2017 and there are no signs that things will get any better soon.
Impacts Felt from Electronics Manufacturing to Whiskey
As the trade road goes both ways, let’s take a look at which goods from each country are affected and the impact it has on all of us.
While goods like telecom equipment, circuit boards, processors, and furniture to name a few will see higher taxes upon entering the US (yes, this is what a tariff is), goods from US like chemicals, vegetables (soy, corn, wheat), and alcohol will see a tax from China upon entry. This means a few things for those markets and the people in those industries.
Higher taxes basically forces sellers to raise price or cut margin – neither is good for anyone. This also makes it incredibly difficult to compete in that market.
Let’s peek at the impact on supply chain in electronics manufacturing as an example. This could have a ripple effect which ends up increasing production costs of circuit boards and basic processors in both the US and China. This begs the question, at what point do tariffs and higher taxes defeat the idea of creating a level playing field and remain only as political tools?
Think About the Impact on People
Considering the products above, when trade wars happen the most impacted are manufacturers and producers. This is because it’s immediate for them. Consumers may feel it in their wallet six months after, once product hits the shelf.
From what we’ve seen at TechDesign during this trade war already, people from the US who buy products from China – IoT project makers, Creators, start-ups and SMBs – have begun to see the hit because they don’t have the millions to wait it out with that bigger companies have.
Companies who sell products manufactured in China to the US market – low margin makers, companies trying to get enter the market, and companies who pride themselves on passing on lower prices to consumers –have all had to start cutting their margins even more and rethink their unique selling point strategies to be able to stay afloat.
The Electronics Manufacturing Smart Alternative
Trade wars are a messy business that most business minded people steer clear of if they can. Searching for a country that has a complete electronics supply chain, stringent anti-IP theft legislation, transparent and open policies on process and method, experience in managing factories to high ISO standards for decades is a challenge. A place disinterested in creating trade deficits and high tariffed borders, where professional and high-quality electronics manufacturers understand how to consistently deliver value in products and guarantee design/manufacturing/assembly by skilled workers who pioneered their craft. To find this place, simply ask yourself where the Foxconn, Acer, Nvidia, and TSMC are headquartered and have their R&D teams based – you’ll have a clear answer. Once you realize that country exists and checks off every box on your project list, you’ll wonder why you never considered Taiwan before.
No Trade War, Just Electronics Manufacturing at Its Best
TechDesign connects you to authentic electronics components and modules which ship daily and directly from manufacturers in Taiwan. Consider TechDesign a platform which helps companies find the right suppliers for them, without politics. With 450+ suppliers and 700+ hardware solutions, our professional project managers are able to help you find the most suitable solutions at any development stage.