Workers weld acid batteries at the Leoch International Technology Ltd. factory in Saltillo, Coahuila, Mexico, Monday, Oct. 7, 2024.
Mauricio Palos | Bloomberg | Getty Images
The world’s most valuable chipmaker and the world’s largest electronics contract manufacturer Announce In November, Foxconn was building a large factory in Guadalajara, Mexico, to assemble Nvidia’s artificial intelligence servers.
From early 2025 Nvidia The companies said they will begin production of their highly requested GB200 NVL72 server racks in Mexico.
The announcement reflects what might be at stake if President Donald Trump’s blanket tariffs go into effect. trump card More details are expected to be revealed about specific tariffs on imports from China, Canada and Mexico on Saturday.
and apple,,,, Microsoft and Tesla When it reports December quarter earnings this week, investors will want to know how Trump’s threat of blanket tariffs at the country’s top trading partner affects its business.
Those companies have grab and proposed tariffs Consumer products from China in 2018 and China’s revenge. But Trump’s proposed tariffs on Mexican electronics would be a new wrinkle.
That’s because many companies in what’s being called a near-concerted effort specifically expanded production in the country in response to shared disruptions and the first Trump administration tariffs.
“If we raise tariffs in Mexico, we’re actually punishing companies that are very progressive and trying to make huge strides and restructure their supply chains,” said Richard Barnett, chief marketing officer at Siemens SupplyFrame Electronics. Component prices and delivery times.
According to the International Trade Commission, imports of electronic products from Mexico rose from US$86 billion in 2019 to US$1,003 billion in 2023, accounting for approximately 18% of total electronic imports. It is China’s second-largest source of imported electronics after the United States, which reported $146 billion in imports in 2023.
In addition to Foxconn, Chinese electronics manufacturers Lenovo and Hisense In the past few years, there have been announcements about building a factory in Mexico. Flex, a Singapore-based contract manufacturer of gadgets and electronics, said it is the largest exporter in the Mexican state of Jalisco.
Simon Geale, executive vice president of Bain & Co’s supply chain consulting firm Proxima, said Trump may want to avoid a “loophole” to avoid tariffs in Mexico by expanding the U.S.-China trade war.
“If you look at Chinese investment in Mexico, in the last three to five years, it’s been through the roof,” Geale said.
Even with Mexico’s growth, China remains the largest source of U.S. electronics imports, accounting for 78% of production of smartphones, 87% of video game consoles and 79% of laptops, according to the Consumer Technology Association, a trade group. CTAs. About a quarter of China’s imports are electronics.
While Nvidia’s high-value and high-margin products like its GPUs are less sensitive to tariffs, many of the minor parts of the build require Billion-Dollar AI Data Centers Communications, storage and power management components, for example, are vulnerable to price changes and import duties, Barnett said. After Trump began threatening tariffs, the price index for supply gold showed that in the fourth quarter of 2024, electronic components increased by 6% year-on-year.
NVIDIA CEO Jensen Huang was asked about the potential impact of November’s tariffs, shortly after Trump’s election victory.
Huang added at the time: “Of course, no matter what the new government decides, we will support the government, which is our highest priority. The company will comply with regulations.
Foxconn did not respond to a request for comment, and Nvidia declined to comment.
raise price
trade groups, academics and even the head of the World Trade Organization warn A trade war spurred by Trump’s tariffs could slow global trade and raise prices for consumers. analyst has said the Trump administration may be considering talks with other countries on issues such as drug trafficking and immigration, although the president has denied this.
“The four big impacts I foresee from tariffs are higher prices, lower federal tax rates, slower growth and fewer new jobs,” said Brett House, a professor of professional practice at Columbia Business School.
It’s unclear how big this tariff might be.
On the campaign trail, Trump talked about tariffs of up to 60% on China, and on all other imports. In his first week in office, Trump stepped back from his biggest responsibilities, discussing sweeping tariffs on Mexico and Canada, as well as 25% tariffs on Chinese goods.
according to Report by CTA.
Prices for laptops and tablets could rise by 45%, video game consoles by up to 40% and smartphones by up to 26%. According to CTA data, the average price of a smartphone has increased by $213.
“This will impact unit sales, meaning the price of each product will increase significantly,” CTA CEO Gary Shapiro said.
A key difference between these tariffs and those of 2018, which Trump threatened to apply to all products, is that the 2018 tariffs targeted specific product codes and categories, and companies could apply for exemptions on their goods.
Whether Trump follows through on signing the tariffs across the board remains to be seen. The Washington Post reported earlier this month that the Trump administration was only considering fees in some departments.
Experts at Columbus Consulting, a consulting firm focused on retailers, say their clients have shifted budgets to address rising costs. The company advises customers to take drastic measures (such as moving production to other countries or aggressively stockpiling extra inventory) until they know exactly what will happen.
“We need to look at the definition of what is going to be taxed and when and for what products,” said Jeff Gragg, managing partner at Columbus Consulting. “Until we get more details around it, overreaction won’t be an option. Putting you in a dangerous position.”
Attempts to mitigate tariff charges could end up being costly, whether in higher freight prices or the opportunity cost of tying up capital in inventory, Gragg said. Some companies will have to pass the costs on to consumers, he said.
However, the current uncertainty surrounding import tariffs is not necessarily a reflection of the ocean changes of the past few years.
Some electronic products still have tariffs on them from Trump’s first term. For example, semiconductors from China currently have a 50% tariff. The Biden administration has largely left the import tariff system in place from the first Trump administration, leaving companies with less change, but many still have to grapple with import taxes.
“Supply chains thrive on predictability, and the only thing that’s predictable about Trump is that he’s going to be unpredictable,” Gale said.
