The information technology industry has been at the center of the widening U.S. – China trade war. Computer component exports were included in the first round of tariffs applied by America in July, Panjiva analysis shows, while a wider range of products including servers but not laptops were captured in the September round.

The ceasefire on raising duties further, outlined in Panjiva research of Dec. 3, nonetheless leaves those tariffs in place and leaves computer manufacturers with tough supply chain decisions to make.

In the case of Dell the company has taken the approach that “where we have incurred in higher cost with tariffs, we have passed that through to end users”, VC of Products Jeffrey Clarke has said according to S&P Global Market Intelligence.  Notably that has had “no apparent impact to demand”, suggesting at least the possibility that future tariff increases could be passed on too.

While the company has been able to pass on higher costs it nonetheless front-loaded imports of  of PC parts (HS 8473.30) ahead of tariffs being applied at a 25% rate in July, Panjiva data shows, with an 8.2x increase in imports in the three months to July 31 vs. a year earlier and a 48.9% drop in the three months to Oct. 31 vs. the three months to July 31. It has also cut imports of server-type computers (HS 8471.50) by 48.4% in the three months to Oct. 31 vs. a year earlier despite tariffs of just 10% having been applied.

Chart segments U.S. seaborne imports by Dell Inc. by product (HS-6).   Source: Panjiva

Another strategy that can be followed is to apply for an exemption from the tariffs. So far Dell’s U.S. desktop computer manufacturing business has not followed that strategy. However exemptions on imports of storage devices (8471.70) have already been requested by Asus, Hitachi and Toshiba. They have yet to be successful.

Imports of storage devices from China have already slumped in response to the tariffs having dropped 23.6% in September vs. June. The need to substitute more expensive devices from elsewhere will have driven a 9.2% rise in the average cost per unit in 3Q 2018 vs. 2Q.

Yet, at an average cost of $114/unit that increase seems unlikely – as Dell has flagged – to change consumer behavior significantly once incorporated into retail prices.

Chart segments U.S. imports of data storage units by origin and average value per unit on a three-month average basis.   Source: Panjiva