US tariffs on China to hit cloud and networking industry

The US has imposed tariffs on parts for the computer servers and networking gear that power cloud data centers, internet-based services and some of the parts for the machines used to make semiconductors, according to a list of products released by US Trade Representative (USTR) on Monday.
Internet users in China pix credit to
10 percent tariffs on about $200 billion worth of Chinese imports will attract protest from US technology companies.

The final list of taxed devices from the USTR avoids many big consumer brand names and products. The United States will spare Apple Inc’s Watch and other consumer gadgets from the latest round of tariffs on Chinese goods, Reuters reported.

The iPhone was not among the ‘wide range’ of products that Apple told regulators would be hit by the $200 billion round of tariffs in a Sept. 5 comment letter to trade officials. Apple feared for its Apple Watch and its wireless AirPods headphones, but both were left off the list announced on Monday.

The new round of tariffs will take effect on Sept. 24 at a 10 percent level and rise to 25 percent on Jan. 1, 2019.

If US expands the tariffs to an additional $267 billion worth of goods then nearly every Chinese import would be affected, including the iPhone, along with all other smart phones.

The new list would also spare fitness trackers from Fitbit, which had said in a comment letter to regulators that the tariffs would compromise its own investment in the United States.

Some products that help computer networks operate, such as routers, will remain on the new list. That could affect smaller technology firms such as Eero, a startup company that makes home routers and had asked to be exempted from the tariffs. Altogether about 300 product categories were given reprieves, including some non-tech consumer devices such as bicycle helmets and baby car seats.

An array of equipment used to make servers and networking gear for data centers is on the list announced on Monday.

A group of tech companies including Cisco Systems, Dell Technologies, Hewlett-Packard Enterprise and Juniper Networks had asked that many of those items be dropped, but they remained on the list with only a few exceptions such as a group of networking-related accessories.

The group said in a comment to trade regulators on Sept. 6 that “by raising the cost of networking products, the proposed duties would impede the development and adoption of cloud-based services and infrastructure.”

Apple also told regulators earlier that some of the gear in its data centers was likely to be hit by tariffs.

The chip industry was also hit by the new levies.

Lam Research, a company that makes gear for manufacturing chips, said in a Sept. 6 letter to trade regulators that duties on raw silicon, ceramic machinery parts and other items “add costs to our U.S. manufacturing operations and reduce our competitiveness in the global semiconductor manufacturing market.”

Twenty-eight percent of spending within key enterprise IT markets will shift to the cloud by 2022, up from 19 percent in 2018, according to Gartner.

Growth in enterprise IT spending on cloud-based offerings will be faster than growth in traditional, non-cloud IT offerings. Despite this growth, traditional offerings will still constitute 72 percent of the addressable revenue for enterprise IT markets in 2022, according to Gartner forecasts.