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Tariff Removal Could Mean Fewer U.S. Jobs And Lower-Priced Goods

Tariff Removal Could Mean Fewer U.S. Jobs And Lower-Priced Goods
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Earlier this week the United States and China agreed to drop tariffs for various technology products, including GPS devices and semiconductors.

Apple Inc. (NASDAQ: AAPL) and other manufacturers could benefit (notably those that manufacture products in China), but one analyst says there are bigger issues at hand.

"China finally realized that, going forward, most of the stuff that [had tariffs] was likely to be built in China, not the U.S.," Rob Enderle, principal analyst at Enderle Group, told Benzinga. "It made no sense for them to tariff it anymore and the U.S. was looking for a deal."

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That deal means that consumers could see lower prices regardless of what happens next.

"The issue will be more of the stuff will likely get made in China, where the labor is cheaper and the controls over the ecology are substantially lower," Enderle added.

"[This] results in lower cost of goods, and lower cost of goods without tariffs means a lower price at the stores. If you're one of the folks in the United States that builds these products, you're probably going to be looking for another job."

Tech industry expert and analyst Jeff Kagan did not have much to say on the matter, but he fears that the United States has made a mistake in removing the tariffs and will get nothing in return.

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'More Agreements Like This'

Dan Miller, senior analyst and founder of Opus Research, has a different take on the tariff decision.

"It does portend that the world is coming to grips [with the fact] that China is going to be a more open market than it had been previously," Miller told Benzinga. "It becomes less cynical to talk about selling more things into an open market in China and vice versa. There's got to be more agreements like this."

American Manufacturing? Where?

Thus far, it seems that sales -- not tariffs -- have had the biggest impact on Apple and Google Inc's (NASDAQ: GOOG) (NASDAQ: GOOGL) decision to manufacture or assemble products domestically.

Apple has been assembling select iMacs in America for at least a few years. The company reportedly invested $100 million to increase its domestic efforts. Apple later announced that it would manufacture (not merely assemble) the Mac Pro in the United States.

Google's domestic assembly plans haven't been as prominent. The company worked with Flextronics to build the Moto X in America, providing several hundred domestic jobs. Flextronics hoped to employ as many as 2,000 people, but the Moto X flopped at retail. Earlier this year Google announced that it planned to close the factory.

Previously Google had attempted to manufacture the Nexus Q, an unusual streaming media device, in America. Google ultimately canceled the project and gave away preview models to those who had pre-ordered the device.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Posted-In: Dan Miller FlextronicsAnalyst Color Politics Top Stories Economics Tech General Best of Benzinga


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