Last month, the legendary hardware hacker and entrepreneur Andrew “bunnie” Huang (who is also a talented science communicator) published a great explainer on the quirks of the Trump China tariff plan, which exempts finished goods (like TVs), but imposes stiff taxes on components that are shipped from China to US factories for final assembly, a tactic common to the most innovative, cutting edge companies who fear having their trade secrets stolen by Chinese manufacturing contractors.
Now, Huang has written a short, layperson-friendly version of his essay for CNN, laying out the case in a way that people not involved in the tech industry, STEM education, or other esoteric fields can understand.
However, the current tariffs enacted by the Trump administration reveal quite the opposite. Import of raw materials, such as many of the components and parts that go into a smartphone, are taxed, while import of finished goods such as the smartphones themselves are not. This policy intends to penalize China without immediately driving up the prices of consumer goods. However, it’s like taxing the import of flour, sugar and cacao, while baked goods remain duty-free.While this policy does stabilize the pricing of cheap import cakes, it drives up the cost of the local production. The owner of the local bakery now has to make a hard choice: either raise prices and risk going out of business due to reduced sales, or produce the cakes outside of the USA to avoid the tariffs on raw materials, and possibly lose control over the age-old family recipe. With the current tariffs, you can have your cake and eat it today, but tomorrow you’ll be out of a job.
Trump’s fast and loose trade policy endangers American jobs [Andrew “bunnie” Huang/CNN]