The Consumer Technology Association’s (CTA) recent whitepaper “PNTR Revocation is a Recipe for Inflation” examines a critical issue in current U.S. trade policy debates – the potential economic impacts of revoking Permanent Normal Trade Relations (PNTR) status for China. This move has been proposed in various legislative bills and continues to gain traction in policy discussions. However, the CTA analysis cautions that such a shift could have serious negative repercussions for both consumers and the broader U.S. economy.
The most immediate effect of removing China’s PNTR status would be a dramatic spike in import tariffs, potentially rising from 0% to as high as 35% on widely used consumer technology products. For context, these elevated rates would be even higher than the tariffs applied under the recent Section 301 trade actions. This substantial tax increase could then translate into significantly higher prices for electronics like laptops, smartphones, tablets and more.
Higher Prices, Lower Spending Power
The report estimates that the proposed tariff hikes could decrease American consumers’ spending power by over $30 billion. Much of this reduction would come from inflated costs for essential tech devices that families and businesses depend on. Additionally, these higher sticker prices would likely exacerbate existing inflationary pressures that consumers are already struggling with.
Compounding this issue is the fact that many consumer technology products are produced primarily in China currently. Shifting such a large volume of manufacturing capacity to other countries cannot happen overnight. Thus the lack of alternative suppliers, at least in the short-term, suggests particularly painful price spikes could occur before production stabilizes.
Overall Economic Costs
In addition to hitting consumers’ wallets, the CTA analysis warns that removing China’s PNTR could also negatively impact broader U.S. economic growth and competitiveness. When accounting for potential gains in U.S. production and tariff revenues, the net result is still a loss for GDP. Main drivers behind this loss include lower consumption levels, reduced productivity from aging devices, and weaker export competitiveness as China retaliates.
While some may argue these economic troubles are a necessary cost to counter China’s unfair trade practices, the scale of disruption from revoked PNTR status gives reason for pause. Especially when considering that other less disruptive policy tools may be able to address these trade issues without simultaneously hampering U.S. economic interests.
Inflaming Digital Inequality
There are also concerns that the resulting increases in device costs would disproportionately affect lower income communities. Over the past decade, improving affordability of smartphones and computers has helped connect millions of less affluent Americans to vital education, jobs and healthcare resources. PNTR revocation risks inflaming digital inequality just as bipartisan support for broadband access ramps up.
Weighing Future Policy Choices
As conversations around modifying China trade policy continue, the CTA paper highlights the need for legislators to fully consider potential economic blows. Knee-jerk reactions or incomplete analysis could unleash a level of disruption that ends up harming U.S. consumers and businesses more than China itself. While certainly not an easy challenge, the goal should be addressing valid trade concerns without simultaneously sabotaging American economic opportunities.
