Technology companies say China tariffs will set back US 5G goals

A handful of tech giants are invoking one of the White House’s priorities—leadership in an emerging wireless technology known as 5G—to argue against adding tariffs on $200 billion in goods coming from China.

Intel Corp., Cisco Systems Inc., Dell Technologies Inc. and other tech companies are seeking to convince the U.S. Trade Representative to nix plans to place tariffs on products they say are vital to rolling out fifth-generation wireless services in the US. 

By raising costs for the goods required to build 5G networks, the proposed tariffs “will slow down the pace of technology adoption across the U.S. economy, causing American firms and institutions to fall behind foreign competitors outside of China that aren’t subject to the same tariffs,” Intel wrote in comments filed with the agency late Thursday.

The tariffs appear to run counter to the White House’s stated goal of leadership in 5G technology. In March, the Trump administration scuttled Broadcom Ltd.’s $117 billion hostile bid for Qualcomm Inc. after a U.S. panel that vets foreign deals raised concerns the acquisition could stymie the San Diego chip maker’s 5G development. 

At the time, the White House held up US. leadership in 5G development as an issue of national security. The US Trade Representative is reviewing comments before making a final determination on specific products to tariff. The Trump administration wants to make sure China competes fairly in the emerging 5G market, White House deputy press secretary Lindsay Walters said.

“No final decisions on specifics have been made,” she said. The White House is preparing to increase pressure on China by putting up to 25 per cent tariffs on as much as $200 billion in Chinese goods. That would be on top the $50 billion of Chinese exports the administration already hit with 25 per cent duties. The public comment period on the new tariffs ended Thursday, the last step before a decision.

President Trump on Friday threatened another $267 billion in tariffs on Chinese goods, saying they could be rolled out on short notice. It isn’t clear how significant the impact of tariffs will be on American 5G competitiveness, said Chetan Sharma, a mobile-industry consultant. The market is still nascent, and the supplies of infrastructure for the new technology are only beginning to move out of China. “But if this situation lasts too long into 2019, then there could be measurable impact,” Mr  Sharma said.

The tech companies argued tariffs would stall next-generation technology that promises higher-speed connections needed for self-driving cars, wireless virtual reality and other innovations.

 The tariffs would raise costs on goods such as routers and switches used to roll out 5G, said Cisco, Dell, Hewlett Packard Enterprise Co. and Juniper Networks Inc. in a joint filing. Wireless-service providers would pass those increases to consumers, raising prices for mobile plans, they said. And higher costs would reduce incentives to improve networking infrastructure, the companies asserted.

Like Intel, the companies wrote “the proposed duties would have a detrimental impact on broader US economic and strategic priorities.” Moreover, the companies argue, reduced profits caused by the tariffs could lead to “hiring freezes, stagnant wages, and even job losses, as well as harm to investors such as reduced dividends and erosion of shareholder value,” the companies wrote.

Source: The Wall Street Journal