PCB Tariffs are All the Rage. They Aren’t the Answer.

Supply chains are stronger when spurred by private investment.

Both the Trump and Biden administrations have taken measures aimed at bringing manufacturing back to the US. But realistically, when will that happen?

And how much longer will we ask domestic PCB buyers who must rely on Asia for product to pay a tax for boards they cannot get made in a reasonable amount of time in the US?

In late May the US trade representative announced one more year of reprieve from the 25% tariff for two- and four-layer rigid printed circuit boards.

While two- and four-layer boards represent only a narrow portion of the PCBs manufactured in China, an exemption continuance is good news and will provide some relief to many OEMs and EMS companies struggling with supply chain challenges.

India is jumping on the tariff bandwagon as well. Its Central Board of Indirect Taxes and Customs (CBIC) recently imposed a five-year, 30% “anti-dumping duty” on bare PCBs manufactured in China and Hong Kong. The measure is billed as a way to ensure fair trade and provide a level playing field for the country’s domestic board industry.

Boards made in China may qualify for a number of exemptions to the tariff, however, especially when it comes to high-tech boards. The exemptions lay bare the challenges India faces when it comes to technology and volume production.

The truth is, even with the new tariff, India will need to continue buying higher-tech PCBs manufactured outside its own borders. And China will continue to be a major supplier.

Meanwhile, European officials are expected to soon impose their own tariffs on PCBs made in China. It will be interesting to see how the issue of exemptions will be handled.

In addition to supply chain concerns, the drive for green energy coupled with the government-imposed need to have it now is driving up material costs.

President Biden said in May that he would impose tariffs of up to 100% on imports of Chinese green technologies, including electric vehicles. This targeted escalation has raised import barriers for clean-energy products manufactured in China. This means the measures will slow progress and come at a higher cost for meeting those very clean energy goals set by his administration.

Does this mean national pride comes before a greener planet?

With all the supply chain issues of higher material costs and freight surcharges that domestic EMS companies and OEMs currently face, adding government-imposed inflation of PCB pricing hurts the overall domestic market.

History has shown that tariffs tend to increase domestic prices and raise costs to businesses and consumers. It is a double-edged sword that usually ends up cutting the wrong way. 

Protectionist strategies won’t solve the problems we face, and tariffs are essentially a punitive measure that interferes with PCB buyers’ decisions about what is best for their operations and their customers.

Yes, it is important to have strong domestic manufacturing. But at what cost?

Instead of punishing the consumer, why don’t we incentivize businesses to receive private investment? Instead of those punishing tariffs, how about the government offer a three- to five-year tax holiday to those that invest in domestic manufacturing?

Private investment could be ramped up quickly, and monies invested would be more likely to be well spent, as investors would hold manufacturers accountable and help ensure more efficient operations.

Additionally, the government could support more workforce development programs tailored to the needs of the manufacturing sector. Government investment is needed to help bridge the skills gap and ensure a steady pipeline of qualified workers, which is essential for the sustainability and growth of domestic manufacturing.

By investing in education and training, the government can help create a robust workforce that is capable of meeting the demands of modern manufacturing industries.

Also, better infrastructure can enhance supply chain efficiency. Upgrading transportation networks, ports and logistics systems would reduce bottlenecks and improve the movement of goods. This not only benefits domestic manufacturers but also makes the entire supply chain more resilient to disruptions.

And how about cutting unnecessary red tape? Simplifying the regulatory framework and ensuring it is conducive to business growth can attract more companies to set up manufacturing operations domestically.

Finally, establishing strategic partnerships and trade agreements with other countries can help diversify the supply chain and reduce reliance on any single source. By collaborating with allies and fostering international cooperation, the supply chain can become more robust and less susceptible to geopolitical tensions.

Instead of resorting to punitive tariffs that increase costs, why not try a combination of private investment incentives with infrastructure improvements, workforce development, red tape cutting, and international collaboration?

That’s how I believe we can build a stronger, more resilient domestic manufacturing sector. These strategies would not only help alleviate current supply chain challenges but also position the PCB industry for sustainable growth in the future.

Greg Papandrew has more than 25 years’ experience selling PCBs directly for various fabricators and as founder of a leading distributor. He is cofounder of DirectPCB (directpcb.com); greg@directpcb.com.