Since Trump entered the Oval Office for his second term, Wall Street has become a chessboard. Every day, investors, tech giants, global leaders, and the US president make a dramatic move to win the game. In his Liberation Day Tariffs, Trump levied heavy duties on imported tech items, which was followed by reciprocal tariffs by China, the biggest exporter of tech items to the US. Recently, Trump exempted smartphones, computers, and other electronic items from tariffs. This move partially gave relief to the US tech industry; however, at a broader level, Trump tariffs still reflect US withdrawal from the Information Technology Agreement, signed in 1996.
Information Technology Agreement
ITA is a global agreement, formulated after mutual consensus to eliminate tariffs on certain Information and Communication Technology (ICT) products, including computers, semiconductors, and telecommunication equipment. About 82 members of the World Trade Organization are participants of this agreement, representing 97 percent of world trade in ICT products. The agreement lists 201 ICT product categories protected from burdensome tariffs.
Trump’s Imposition of Tariffs on ICT Products
In Annex 2 of Trump’s executive orders on tariffs, the president gave partial relief to the semiconductor industry. The orders exempted semiconductors and circuit equipment in their raw form from his tariffs. However, the semiconductor industry was badly affected by these tariffs as the US imports large ICT products manufactured outside the country.
In his latest orders, Trump has exempted only 20 ICT product categories from tariffs, which reflects that a major share of these products are still threatened by US tariffs.
US ITA Withdrawal: National Implications
US withdrawal from the ITA will increase the ICT products, highly impacting consumers. As the US tech industry is also dependent on a deeply embedded supply chain in Southeast Asian countries, the tariffs will directly reduce the manufacturing capacity of the tech companies due to less demand. Though Trump is entering a relief phase by giving exemptions to some major products of ICT, a large share of daily ICT products will remain unpurchasable for consumers.
USA ITA Withdrawal: Global Implications
Trump’s withdrawal from the IT Agreement tarnished the multilateral spirit and questioned the principles of fair trade. Although the European Union, the UK, India, and major tech countries are taking precautionary measures and not impulsively retaliating, if Trump continues his protectionist policy, the countries would retaliate in some way, impacting the global tech industry, and affecting consumers with high ICT product prices.
