Nvidia Asks Biden Admin to Exempt Graphics Cards from Tariffs

You could have observed that together with being perpetually out of inventory, PC graphics playing cards are costlier than ever. This isn’t any coincidence, and it isn’t solely attributable to the continuing chip scarcity.

No, these value hikes are partially the results of a Trump-era tariff in opposition to imports from China. With President Joe Biden now in workplace, tech giants whose merchandise depend on GPUs are asking the White House to exempt graphics playing cards manufactured in China.

While the Biden administration has saved Trump’s tariffs on Chinese items in place, the U.S. Trade Representative mentioned in October that it was contemplating reinstating some exclusions after letting them expire on the finish of final 12 months. Already going through crippling provide shortages, tech corporations—Google, Apple, and Intel amongst them—swiftly backed non permanent waivers for tariffs on merchandise and elements produced in China.

Nvidia, HP, and PC-hardware agency Zotac joined the rising choir earlier this week after they filed separate requests to the workplace of the U.S. Trade Representative. These submissions shared the identical manufacturing exemption on “printed circuit assemblies for rendering images onto computer screens (‘graphics processing modules’).” Or, as we all know them, graphics playing cards or GPUs.

Graphics playing cards, the engine behind consoles and gaming laptops, have been some of the elusive merchandise to purchase throughout the coronavirus pandemic because the chip scarcity has prevented provide from coming near assembly demand. Not solely are they troublesome to seek out, however the few that trickle into the market are costlier on account of the 25% tariff instated in 2018 initially of Trump’s commerce warfare with China.

One of the objectives of the tariff was to encourage corporations to maneuver manufacturing to the United States, however the provide chain for a lot of elements nonetheless closely depends on Chinese factories. Nvidia used this to argue that GPUs ought to be exempted from the tariff, stating:

“The products are not manufactured in the U.S. and in only limited amounts in Taiwan. Efforts to create new capacity in countries that presently do not manufacture such products (such as the U.S. and Vietnam) were unsuccessful and were severely hampered by the fallout from covid-19.”

It continued, “Given the limits on supply of semiconductors, it also would have been the wrong time to face lower yields that are associated with new sites.”

HP echoed Nvidia, citing the business’s reliance on China not just for manufacturing however different processes concerned in bringing graphics elements to market.

“AMD and Nvidia have manufacturing locations throughout Asia, in China, the Philippines, Hong Kong, Taiwan, and Malaysia. However, different product lines are sourced from designated locations,” HP told the USTR.

“Regardless of where a graphics chip is initially produced, China is a hub for the ‘back-end’ production (i.e., labor-intensive manufacturing and testing steps) and thus the primary source for imports,” the corporate mentioned. “The products HP sources are not currently produced elsewhere at sufficient capacity, quality, and compatibility needed.”

These requests for exclusions come simply days after Razer CEO Min-Liang Tan admitted that gaming laptops in 2022 can be costlier on account of “significant increases in component costs.”

It’s clear some mixture of shortages and tariffs is discovering its option to particular person shoppers within the type of low product provide and excessive costs, and graphics playing cards are among the many hardest-hit victims. But there are different components concerned as effectively.

Demand for gaming {hardware} has spiked because the begin of the pandemic as folks have been pressured to seek out leisure indoors. This elevated demand has pushed file console gross sales and brought on unprecedented shortages whereas making a marketplace for scalpers to resell at exorbitant charges. Adding gasoline to the hearth is the success of cryptocurrencies, and the explosion of crypto-mining, which requires graphics playing cards. Things acquired so dangerous that Nvidia has to re-release outdated graphics playing cards so its companions may launch new {hardware}.

The results of these converging developments is a damaged market, one during which merchandise promote for a whole bunch greater than they’re value and nonetheless exit of inventory inside seconds. It’s a winless situation with seemingly no finish. Exempting GPUs from import tariffs may assist normalize costs, however inventory shortages will stay an issue till no less than 2023.

Whether GPU costs will stay excessive or probably decline is now within the arms of the USTR, which is able to consider these exclusions on a case-by-case foundation. Products will solely be excluded if they continue to be “available only from China” or if reinstating the exclusion may trigger “severe economic harm” to distributors or different companies concerned.