WOOF! Newsletter

November 07, 2018

How Will the China Tariffs Affect Your Next IT Hardware Purchase?

The tariffs are coming! Tariffs on thousands of products imported from China have just started up. How does that work out for buying laptops, phones, or networking equipment?

Your next IT hardware purchase may cost more.

The tariffs imposed by President Trump on Chinese goods mostly affect consumer goods, like furniture and vinyl flooring.

They also affect some electronic components manufactured in China. Components used in IT hardware: Computers, phones, networking equipment, and so on.

Will this affect our IT hardware purchases in 2019? Yes, likely so. Which purchases, and how much? That's what this WOOF! is all about.

How Tariffs Affect IT Hardware Prices

First, let's map out how the tariffs can increase prices on things like your next laptop.

These tariffs are not on finished goods (e.g. a laptop), but on some Chinese-made components inside those goods (like the laptop's LED screen). The tariff list includes LED panels, PCBs (printed circuit boards), video cards, disk drive parts, some electronics fully manufactured & assembled in China, etc.

A 10% tariff went into effect November 1. The tariff rises to 25% in early 2019, possibly as soon as January 1. Effectively increasing the price.

Higher prices for components mean OEMs – Original Equipment Manufacturers – have to recover those costs after making their devices.

This does NOT mean the entire finished product's price goes up 25%. It only means those tariffed components cost more to the manufacturer. That could translate to a higher price of say, 5% overall. The OEMs will determine those ratios.

What happens for us, the end user? We get incremental price increases on computers, network equipment, and so on. Recovering that 10-25% as part of the whole purchase price.

Brands Affected by the Chinese Tariffs

A list of affected brands includes IT hardware made by:

  • Cisco
  • Dell
  • Extreme Networks
  • HP
  • IBM
  • Intel
  • Microsoft
  • Unisys

There's no way to know all of the hardware affected ahead of time. Tariff-related price increases won't all appear overnight.

Some of these brands do operate in the U.S. They even manufacture some components here (see our "Where IT Hardware is Made" WOOF article). But they also source components from China…thus subjecting their supply lines to tariff.

The tariffs ONLY apply to Chinese goods. Computers & devices made in Taiwan, Thailand, Singapore, Germany, and the USA are not subject to them.

That list includes several IT hardware brands with manufacturing facilities right here in the U.S.:

  • Patriot Memory — Makes DRAM and USB flash drives right here in Silicon Valley!
  • Micron — Makes DRAM and SSD chips in Salt Lake City, UT and Boise, ID. Crucial RAM and Mushkin SSDs use these chips.
  • PNY Technologies — Makes RAM, video cards, and SSDs in Parsippany, NJ.
  • F5 Technologies — Makes networking devices at facilities in San Jose, Seattle, and Massachusetts.

The Tariffs are Coming! The Tariffs Are Coming! Don't Sit on Your Next IT Hardware Purchase

All this means we have a 2-month window before the full tariff takes effect. Now is the time to make any IT hardware purchases you're considering: New laptops, phones, routers, etc.

"But wait," you may think. "What if we 'wait out' the tariffs? They don't look like they'll last forever." That is true; they won't last indefinitely. Their market effects may trigger more manufacturing in non-tariff regions too, such as Europe and the U.S. (We always support more U.S. IT work!)

Waiting to replace old IT hardware is a bad idea. For three reasons: Overall productivity, tax savings, and cybersecurity.

Continued use of aging computers hampers productivity, and increases support costs. Additionally, the Section 179 tax deduction got a boost this past year. All IT hardware bought before December 31 can qualify for a huge tax deduction. (Details at Section179.org.)

Finally, older IT hardware can become a giant cybersecurity risk, particularly for DDoS attacks. Spending 10% more on a replacement laptop is nothing compared to the business-crushing cost of a cyberattack.

 

Beat the tariffs—order your new computers before the end of the year!  Email us at sales@planetmagpie.com to start your next order.