In recent weeks, tariffs have yo-yoed during the current trade war, although frameworks for trade deals were recently reached with two of the United States’ biggest importers, the United Kingdom and China.
The Carolina Journal has been tracking the trade war and its impact on major North Carolina industries recently, especially agriculture, the state’s No. 1 industry, which grosses $111.1 billion annually.
The electronics and tech industry is another industry significantly impacted by tariffs and the trade war. This industry is also deeply entrenched in the agriculture sector, due to high volumes of electronic equipment, parts for farm equipment, or pieces of tech being imported from Europe or China.
In 2023, the US imported $145.9 million, or 24.7% of electronic imports, from China, according to the United States International Trade Commission.
“The biggest thing is we quote jobs; we build circuit boards, we assemble boards. We have to pick and place machines, and all the equipment for that,” Rick Daves, owner and manager of Raleigh-based GRT Electronics, told the Carolina Journal. “Our customers, when we quote something, they expect us to build it for that price.”
In a recent example, GRT placed an order for parts last month and was initially quoted a specific tariff along with the part prices, according to Daves. Two days later, the supplier called to inform them that the tariff had changed. The following day, the supplier called again with another update, stating the tariff had changed once more. Eventually, the supplier admitted they couldn’t provide a definitive tariff rate and would charge whatever amount was determined when the shipment passed through customs.
Currently, GRT purchases parts without a clear price set. Recently, GRT purchased approximately 100 units of a part initially priced between $13 and $16 each. Still, the final cost rose to $32 per unit due to tariffs since the items were imported from China.
“The other thing is we buy parts, and sometimes the distributors don’t know what countries they’re coming from; they could come from different countries,” said Daves. “Some companies have factories not only in China but in Thailand, South Korea, and other countries. If you don’t know what you’re paying for the parts, it’s hard to quote the job. And sometimes you can pass the tariffs on to some customers, but other ones, they want to have some idea of what it’s going to be before they place the orders. It just makes it difficult.”
Experts noted that it’s still too soon to determine whether tariffs will increase investment in the state and suggested that the duration of the tariffs could be a key factor. Many foreign companies might hold off on significant investments, potentially worth hundreds of millions, waiting to see how negotiations between the White House and their home countries play out.
“I don’t really doubt that there will be companies that start to explore this… but how many, how quickly, what magnitude of plans, that’s really hard to sit here and speculate on,” Chris Chung, CEO of the Economic Development Partnership of North Carolina, told the Triangle Business Journal last month.
In May 2005, IBM sold its laptop division in Research Triangle Park to Chinese-owned Lenovo. The company currently employs over 80,000 workers and generates more than $56 million in annual revenue. According to the Triangle Business Journal, experts predicted that tariffs would impact sales for both Lenovo and its competitors. Experts noted that Lenovo has done an excellent job of making itself known outside of China, including branding, such as putting its name on the Lenovo Center in Raleigh, where the Carolina Hurricanes play.
These analysts say CEO of Lenovo Yuanqing Yang prepared for the future by pushing much of the strategy to the company’s service arm, which currently is not impacted by tariffs. The article called diversification a “bright spot” regarding flexibility, but said everyone would benefit from “some stability in the tariff situation.”
North Carolina’s electronics and technology sectors stand to lose a lot due to the international trade wars, according to Brian Balfour, VP of research at the John Locke Foundation. The state’s computer and electronics industry generates approximately $7.4 billion in output, with $2 billion represented by exports of computer and electronic products.
“To the extent foreign nations retaliate with tariffs on American-made products, North Carolina’s computer and electronics manufacturers may take a large hit,” Balfour told the Carolina Journal. “That means fewer sales and can lead to lost jobs. Moreover, complex electronic and technological devices assembled in North Carolina often utilize inputs from foreign countries. Finding affordable inputs from foreign markets helps to make these products affordable for consumers and enables North Carolina companies to operate at a profit. Placing tariffs on these inputs will hurt the bottom line of these companies, forcing some of them to lay off workers or go out of business completely.”
According to Balfour, Texas Instruments, Siemens, and Keysight Technologies source their materials globally but have significant operations in North Carolina.
“Tariffs on imports amount to an added tax on these companies that they’ll either try to pass along to consumers or compensate for with spending cutbacks, neither of which will be good for the job prospects of their workers,” concluded Balfour.
*Editor’s Note: Lenovo challenged the Carolina Journal and the Triangle Business Journal’s phrasing that Lenovo is a Chinese-owned company. While it is true that Lenovo is a multinational publicly traded company listed on the Hong Kong Stock Exchange, its’ largest shareholder is the Chinese government. In 2005, IBM sold Lenovo to Legend Holdings, a Chinese investment holding company.