Gadgets dragged into trade war
Millennials and Gen Z feel victimised by tariff hikes on their toys
● As the US and China fire the opening shots of a trade war, tech-savvy US millennials are already being caught in the crossfire.
Looming tariffs on some of the hottest gadgets among younger consumers, from vaporisers to electric scooters and “smart home” devices, have threatened to drive up prices from this week.
Analysis by Flexport, which provides supply chain and freight forwarding services, has uncovered several categories of consumer products, made in China, that will face a 25% import tariff under the Trump administration’s proposed new rules.
Few have noticed that e-cigarettes and vaporisers from fast-growing companies such as Juul, Pax and Blu, the vast majority of which are made in Shenzhen, have been included in the latest tariff proposals because they appear on a list of import codes vaguely entitled “other machinery”.
Electric scooters and e-bikes, which have soared in popularity over the past year thanks to app-based rental systems from the likes of Uber, will also face a 25% tariff.
The US Trade Representative agency has insisted that last month’s expanded list of hundreds of categories of Chinese imports, valued at a total of $50-billion (about R678billion) a year, “does not include goods commonly purchased by American consumers”.
But young consumers are angry that products particularly popular with their generation seem to have been singled out.
Tiffany Zhong, founder and CEO of Zebra Intelligence, a market researcher focusing on teens, said the tariffs would hurt young Americans. “These products’ biggest customers are millennials and Gen Z. Younger folks adopt tech products much faster,” she said. “This is going to affect our generation.”
While smartphones and TVs have so far been spared the tariffs, after lobbying from retailers and the electronics industry, the list already includes many everyday tech products, even before US President Donald Trump’s threats of applying punitive duties to another $200-billion or more imports.
The first wave of tariffs — on $34-billion of the $50-billion of goods — was set to come into force at the end of this week. It includes “smart home” devices, a key area of investment for Silicon Valley start-ups as well as Apple, Amazon and Alphabet.
Affected products include smart thermostats and internet-connected LED lights, many of which are manufactured in China.
Other tech products that faced tariffs starting this week include disk drives, battery packs and navigation devices.
Tech companies are scrambling to figure out how to respond.
“It’s definitely a big concern for us,” said Rick Kowalski, analyst at the Consumer Technology Association, an industry group.
“Regardless of what the intention was, a lot of this is going to get passed on to consumers or it’s going to get passed on to American businesses that purchase from these [Chinese] companies.”
He predicts that some gadget start-ups are “sure to go under”.
Even more tech companies and consumers could be hit by a second wave of tariffs on imports worth about $16-billion a year, including e-cigarettes and electric bikes.
“The second wave seems to have been a lot more precise on companies in the IT industry . . . and had more products that could directly impact consumers,” said Christian Jordan, vice-president of global customs brokerage at Flexport.
Electric bikes and scooters were captured under import code 8711.60.00, Flexport said, accounting for hundreds of millions of dollars’ worth of imports in the past year.
Start-ups such as Bird and Lime, which offer electric scooters for rent via a smartphone app, have received dollops of new venture capital investment in just the past few weeks to expand their fleets. Most are manufactured in China by Beijing-based Segway-Ninebot.
Uber, meanwhile, is planning to expand its fleet of electric bikes after acquiring the rental service Jump.
With each scooter already costing about $500 and e-bikes even more, a 25% tariff could put a significant dent in these companies’ already substantial capital costs.
Of the $50-billion worth of goods currently proposed for tariffs, more than $20billion are in the consumer electronics sector, according to the CTA. The IT industry’s long-standing reliance on Chinese manufacturing would make it difficult to find alternatives, Kowalski said, while extra duties on electronics components would also make it more expensive to build products in the US.
Younger folks adopt tech products much faster Tiffany Zhong
Founder and CEO of Zebra Intelligence