The Trump administration’s proposed tariffs on $200 billion of Chinese goods includes levies on routers, switches and servers that will raise prices for cloud services in the U.S., a report by the Information Technology & Innovation Foundation says.
The latest round of tariffs, announced last month, applies levies of up to 25% on many key components of cloud computing, from motherboards to memory modules and coaxial cables, hitting both U.S. cloud providers and users, the Washington-based technology and public-policy think tank said in a report this week.
All told, it estimates that a 10% levy on these imports would slow U.S. economic output by $163 billion over the next 10 years, while a 25% levy would slow output by $332 billion.
Washington has already enacted tariffs on a wide range of Chinese imports worth more than $30 billion, a strategy the White House says is aimed at correcting a trade imbalance and to counteract unfair trade practices. The move, enacted earlier this year, sparked retaliatory tariffs on U.S. goods by Beijing.
The new set of tariffs would raise costs for cloud providers in the U.S., where there are currently 3 million data centers supporting cloud services, ITIF researchers said.
In turn, higher costs would be passed along to cloud users through higher prices, the report said. It estimates that more than 90% of U.S. businesses, big and small, rely on some form of cloud computing, adding that together they spent $70 billion last year on public cloud-computing services.
“Many Americans will feel the impacts of the proposed tariffs on cloud computing through increased prices, lost jobs and decreased economic opportunity,” Caleb Foote, an ITIF research assistant who co-wrote the report, said in a research note.
Chris Peck, founder of TBM Council, a nonprofit group of chief information officers at large firms, said the complexity of the global supply chain for cloud is likely to dampen the impact of the proposed tariffs on cloud costs for both U.S. providers and corporate customers.
“CIOs are expected to use the same budget, but provide differentiated technology-enabled services,” he said, adding that cloud services will remain in high demand because they enable CIOs to achieve these goals and more.
According to CompTIA, an IT industry trade group, total U.S. tech imports from China totaled an estimated $165 billion in 2016, with cell phones accounting for roughly 40%, based on the latest available data.
Stefanie Holland, the group’s senior trade advisor in Washington, said the proposed tariffs on cloud equipment and other IT components from China amount to “taxes that are going to make manufacturing here in the U.S. more expensive,” she told CIO Journal.
Rather than applying costly tariffs, she said trade issues with China, including IP theft and other tech issues, are best addressed by working with the World Trade Organization or industry partners in Europe.
Across the board, the U.S. trade gap in goods and services in July widened by 9.5% from June, to a seasonally adjusted $50.08 billion, the largest increase in more than three years, the Commerce Department said Wednesday. That pushed the deficit for the first seven months of the year to $337.88 billion, the largest in a decade, the agency said.