President Trump is losing his trade war with China at the expense of the tech industry's future.
Someone needs to remind Trump that the last president to significantly raise taxes on imports against the advice of his economists was Herbert Hoover in 1930. Hoover's backing of the Smoot-Hawley Tariff Act triggered the Great Depression. The parallels to the present are staggering.
The innovation economy brought the United States out of the devastating 2008 recession and has created a record-setting boom. The president's recklessness not only threatens to send the nation's economy into a tailspin, but it also risks our global dominance in a field that will determine who will lead the world for decades to come. The Consumer Technology Association estimates that Trump-imposed tariffs have already cost the tech industry $10 billion since July 2018.
The president's trade war entered a new phase when he imposed a 15% tariff on $115 billion worth of goods. It marks the first tariffs on Apple products made in China, including Apple Watches, AirPods and HomePods. Trump is planning to increase tariffs on another $250 billion worth of goods on Dec. 15. The list of affected tech products includes laptops, smartphones, tables, video game consoles and big screen TVs.
Ho, ho ho. Happy holiday shopping, American consumers, as businesses pass along the costs to shoppers in the form of higher prices.
It's time for Trump to admit the fallacy of his premise that "trade wars are easy to win." His approach since taking office has only led to a higher U.S. trade deficit, which is now greater than $2 trillion. And growth in manufacturing jobs, which showed some initial gains, has slowed to a trickle.
The president is now threatening to use his emergency powers to force U.S. companies out of China, period. That would be a heavy blow to companies such as Apple, which has made substantial investments in China. Analyst Matthew Cabral of Credit Suisse told CNBC that China accounted for about 20% of the tech titan's revenue and operating profit in 2018.
The president deserves credit for efforts to protect patents and intellectual property. But if he wants to ensure that the United States maintains its longstanding global dominance in technology, he should focus his efforts instead on making investments in U.S. infrastructure and education, and supporting comprehensive immigration reforms that will ensure the brightest minds from around the world flock to the United States.
It's imperative that the president do everything within his power to strengthen — rather than weaken — what is forecast to remain the fastest growing industry in the world for the next decade.