U.S. levies tariffs in onshoring bid, hiking tech costs
Newly implemented tariffs mean businesses will face added costs and trade complexities as the Trump administration pushes for companies to manufacture onshore.
U.S. President Donald Trump unleashed global reciprocal tariffs Wednesday on multiple countries, including China, India, Japan and the European Union. The administration aims to advance U.S. manufacturing, but the tariffs will create tenuous trade relations for U.S. businesses.
"They do it to us, and we do it to them," Trump said in a speech after signing an executive order instituting the tariffs.
The administration set a 10% baseline tariff for all imported goods, with higher tariffs for certain countries, including China at 34%, EU states at 20%, India at 26% and Japan at 24%. Trump's previously imposed 25% tariffs on goods from Mexico and Canada not covered by the existing United States-Mexico-Canada Agreement (USMCA) remain intact. Trump also imposed a 25% tariff on all foreign-made automobiles. The tariffs launched on what the administration deemed "Liberation Day" and are set to take effect immediately.
The Trump administration's goal with the new tariffs remains unclear, said Rodrigo Balbontin, associate director covering trade, intellectual property and digital tech governance at the Information Technology and Innovation Foundation. The administration has named promoting U.S.-based manufacturing, national security concerns, immigration issues and "massive" tariffs from other countries as reasons for increased U.S. tariffs.
"There is a plethora of objectives," Balbontin said.
The tariffs will affect most U.S. businesses importing products such as computers and other basic goods, Balbontin said. That will result in higher costs for businesses.
Still, businesses, particularly manufacturers that need goods like minerals and essential construction materials, have been preparing for the U.S. tariffs, said R "Ray" Wang, CEO of Constellation Research.
"What we've seen is everybody buying extra supplies, steel they need," Wang said. "On the manufacturing side, rare earths, they've been going after this pretty hard. They know that it's coming. The question is, for how long."
U.S. tariffs' effect on businesses
Businesses are delaying investment decisions due to trade uncertainty, Balbontin said. Tariffs can be used as a negotiation tool, and the reciprocal tariffs could be the start of trade renegotiations with the targeted countries, meaning more changes could come later in 2025, Balbontin said.
It is likely that uncertainty will continue after today.
Rodrigo BalbontinAssociate director, Information Technology and Innovation Foundation
"It is likely that uncertainty will continue after today," he said.
Balbontin said one of the reasons cited for adding tariffs is to drive further investment in U.S. manufacturing as companies seek to avoid paying for goods imported from outside of the country. However, it could not only take years to facilitate the reshoring of U.S. production, but tariffs also won't always push companies to bring production onshore.
In 2018, Caterpillar, a U.S. construction company and engineering product manufacturer, decided to make manufacturing investments outside the U.S. to serve non-U.S. markets following retaliatory tariffs rather than reshoring production in the U.S., Balbontin noted.
An added challenge is that other countries, including Mexico and others in the European Union, will likely plan their own retaliatory tariffs. Both Canada and China have already enacted retaliatory tariffs on U.S. goods.
"The U.S. becoming an unreliable trade partner for the rest of the world will affect some long-term investment decisions," Balbontin said. "It will be challenging to establish long-term relations with specific trade partners from specific countries for businesses."
The Trump administration has said tariffs are effective tools for achieving economic objectives. The administration cited a 2023 report by the U.S. International Trade Association that said additional U.S. tariffs imposed on steel and aluminum products from China reduced U.S. imports and increased U.S. production.
Trump pointed to companies already making U.S. investment announcements, including Apple's plans to spend $500 billion on U.S. AI infrastructure and OpenAI and SoftBank's $500 billion Stargate AI project for new AI data centers.
"If you want your tariff rate to be zero, then you build your product right here in America," Trump said.
Makenzie Holland is a senior news writer covering big tech and federal regulation. Prior to joining Informa TechTarget, she was a general assignment reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.
