On September 24, 2018, many manufacturers experienced an across the board 10% tariff on products manufactured in China and designated for sale in the U.S. Currently it is estimated that the U.S. imports roughly $500 billion in Chinese goods each year, and — combined with existing tariffs — these new penalties would cover half of all goods sent to the U.S. from China each year.
Many public and private sector firms will pay more for networking gear as a result of tariffs on China. Vendors such as Cisco, Dell, HPE, Juniper and Extreme have already implemented a pass through for increased costs or are planning to pass on the additional tariff costs to customers. While the current tariff rate of 10% was instituted in September, the rate could jump to 25% on January 1, 2019, if a new trade agreement between the US and China is not reached.
To date, most data networking manufacturers have passed the tariff increase along to clients with little or no visible market impact. Cisco has not seen any slowdown in purchases, reporting a recent increase of 8% year over year; Of note however, Cisco enacted a 15 percent price increase on a range of their products in September while Juniper Networks (3.5 percent increase) and Arista Networks, (a 3.3 percent increase) followed suit.
“But if the tariff rate does jump to 25%, there’s the potential for customers to delay orders in an effort to wait out the tariffs. That may not happen, but it’s something to keep an eye on.” – Cisco CEO Chuck Robbins.
In August 2017, the U.S. announced a formal investigation into attacks on the intellectual property of the U.S. and its allies, which is estimated to cost the U.S. alone an estimated $225–600 billion a year. From the finding of the US Trade Representative Section 301 Investigation into China, the US claims that China enforces laws that allow them to legally avoid certain terms previously laid out by The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Additional nations and international Unions have also joined the US in exploring Chinese violations.
