Continuous trade conflicts between the U.S. and China have exerted considerable stress on American tech enterprises, compelling them to adjust to unforeseen financial obstacles. Newly implemented tariffs by President Trump’s administration have altered the economic prospects for companies dependent on manufacturing in China. These strategies have resulted in higher expenses, disrupted supply chains, and heightened unpredictability for numerous tech companies, placing the industry in a fragile state.
Deena Ghazarian, who established the electronics firm Austere in California, felt the impact of these shifts directly. Just after starting her company in 2019, she encountered an unexpected 25% tariff on the premium audio and video accessories imported from China. Her once-promising business venture rapidly transformed into a financial battle. The new expenses, which were not a concern before, jeopardized the continuation of her enterprise.
“I truly believed my company wouldn’t survive its initial year,” Ghazarian reflects. The abrupt tariff imposition compelled her to take on the increased costs to maintain competitiveness, resulting in very slim profit margins. While Austere was able to withstand the early obstacles, the business is once again facing a similar situation as tariffs have reemerged with an even wider application and elevated rates during Trump’s second term.
The existing tariff system greatly affects a variety of electronic products, such as smartphones, tablets, laptops, and video game consoles, many of which are primarily manufactured in China. As reported by the Consumer Technology Association (CTA), China continues to be the leading supplier of electronics to the U.S., with imports reaching $146 billion as recently as 2023. This comprises 78% of smartphones, 79% of laptops and tablets, and almost 87% of video game consoles entering the American market.
The economic strain of these tariffs is borne by U.S. importers instead of Chinese manufacturers, forcing American companies and consumers to bear the expenses. Ed Brzytwa, CTA’s vice president of international trade, highlights that these extra costs frequently filter down to customers through increased prices. For businesses with tight profit margins, transferring these expenses to buyers becomes inevitable.
The financial burden of these tariffs falls directly on U.S. importers rather than manufacturers in China, leaving American businesses and consumers to shoulder the costs. Ed Brzytwa, vice president of international trade at the CTA, points out that these additional expenses often trickle down to shoppers in the form of higher prices. For companies operating on slim profit margins, passing these costs onto consumers becomes unavoidable.
Retailers like Best Buy have already warned of the consequences. CEO Corie Barry recently stated that the majority of the increased costs from tariffs would likely be reflected in higher prices for customers. Similarly, tech manufacturers such as Acer and HP have announced plans to raise prices on their products, citing the financial strain caused by the trade policies.
While some businesses have sought alternatives to Chinese manufacturing, shifting supply chains to countries like Vietnam, Thailand, and India, these transitions are neither quick nor cost-effective. Mary Lovely, a senior fellow at the Peterson Institute for International Economics, explains that developing new supplier relationships takes time and substantial investment. Additionally, few nations offer the same scale and expertise as China, which remains a cornerstone of global technology production.
Domestic production in the U.S. has seen slight growth due to these tariffs, with firms such as Apple increasing manufacturing in India and Taiwanese chipmaker TSMC expanding to Arizona. Despite these initiatives, the move towards local manufacturing encounters obstacles, including elevated operational expenses and strict regulations.
For smaller companies like Austere, the enduring effects of these tariffs are a major worry. Ghazarian considers the option of increasing prices to counterbalance expenses but is concerned about losing customers in an already challenging economic climate. “There’s a threshold to what consumers are ready to pay for perceived value,” she notes. “If we exceed that, we risk losing them completely, particularly with inflation already squeezing household finances.”
In Trump’s initial term, a few companies managed to secure exemptions from specific tariffs, and there is speculation that similar exceptions might develop depending on upcoming trade discussions. However, Trump has often used tariffs as a negotiating tactic, adding unpredictability to the long-term perspective for businesses.
During Trump’s first term, some companies successfully negotiated exemptions from certain tariffs, and there is speculation that similar carve-outs could emerge depending on future trade negotiations. However, Trump has frequently used tariffs as a bargaining tool, introducing uncertainty into the long-term outlook for businesses.
The potential for an economic slowdown in the U.S. adds another layer of complexity to the situation. If growth falters, the administration may reconsider its stance on tariffs to avoid further damage to the economy. For now, however, the prospect of easing trade restrictions seems unlikely, as Trump has signaled plans to impose even higher tariffs on Chinese goods and extend duties to other countries.
Despite these obstacles, Ghazarian is resolute in her efforts to adjust. By building up inventory prior to the latest tariff implementations, she has managed to secure temporary respite to endure the challenging period. Looking forward, she is investigating ways to reduce expenses and exploring alternative production techniques to keep her business running. “I had hoped to concentrate on growth and innovation, but unfortunately, much of my time is dedicated to strategies for survival,” she laments.
Despite these challenges, Ghazarian remains determined to adapt. By stockpiling inventory before the latest tariffs went into effect, she has gained temporary relief to weather the storm. Looking ahead, she is exploring cost-cutting measures and alternative production methods to keep her business afloat. “I had hoped to focus on growth and innovation, but instead, so much of my time is spent on survival strategies,” she laments.
The ongoing trade war underscores the delicate balance between economic policy and its unintended consequences. While the administration’s tariffs aim to achieve broader geopolitical goals, they have created ripple effects that reverberate through industries and households alike. For U.S. tech firms, the road ahead will require resilience, adaptability, and a willingness to navigate an increasingly uncertain global trade landscape.
