Technology and Telecom Sector Assess Growing Exposure to Trade Wars

President Donald Trump's administration last week announced it was developing a plan for what it said would be reciprocal tariffs in reaction to nations that have larger duties on U.S. imports than the U.S. currently levies on theirs. "This lack of reciprocity is one source of America’s large and persistent annual trade deficit in goods: closed markets abroad reduce U.S. exports and open markets at home result in significant imports, both of which undercut American competitiveness," it said.

The U.S. has a sizable domestic manufacturing base for fiber-optic cable, but the electronics that light up fiber rely heavily on imports, Lozada said.

Fiber-optic maker Corning is assessing the impact of tariffs and “working to mitigate any impact to our customers,” the company emailed. “Generally speaking, Corning manufactures where its customers are, and is a substantial contributor to advanced manufacturing in the U.S.”

Information and communications technology (ICT) supply chains are global, with every radio and switch having dozens of components that often are sourced from around the world, said Lozada. Even products certified as compliant with Build America Buy America Act guidelines could see price hikes due to tariffs if they use globally sourced materials, he added.

Lozada said the administration must consider the impact of tariffs' costs on consumers. Tariffs also could hurt domestic manufacturing by making it more expensive to source components that go into ICT products, he said, adding that retaliatory tariffs from other nations on U.S.-made products are a concern as well. TIA wants to see targeted tariffs and exemptions used for some technologies, rather than an across-the-board approach, he said, pointing to Section 301 tariffs having a process that allowed the U.S. Trade Representative to sometimes grant exemptions to duties on Chinese imports. He said there should be a tariff process and structure -- involving reports about unfair trade practices, a focus on specific industries and an exception process -- rather than going forward with broad tariffs.

“Where the market will probably be hit hardest is the price of a smartphone,” emailed John Strand of Strand Consult. But U.S. software “makes up a very large part of the cost of a smartphone. Just ask Apple,” he said. Strand said the question is complicated since a lot of equipment is produced in countries such as China, India, Malaysia and Thailand: “Different countries, different tariffs.”

Under the Trump tariffs, “if the EU imposes a 10% tariff on American cars, the U.S. will respond accordingly,” Strand said, adding that the same rule will apply to telecom gear. The telecom market probably won’t be hit that hard, he said. “Companies will adapt,” and “some will move production to the U.S.” A company like Ericsson already has significant production in the U.S., “which means that they are not hit as hard as others.”

Carri Bennet, counsel to the Rural Wireless Association, told us Friday that tariffs have its members “concerned and anxious.” Members didn’t factor higher costs for some components into their calculations when they made buildout commitments as part of federal and state broadband programs, she noted.

For customer premises equipment, including smartphones, Wi-Fi devices and tablets, “increases will be passed on to consumers, which means the consumer will likely hang on to devices longer,” Bennet said. For the buildout of networks that are time-sensitive because of the award of federal or state funding, “we’re likely looking at delays … with pricing going up” and extensions requested, she said: “This all adds to the cost and time of these projects.”

Tariffs will have “a sizable, but manageable” impact on the wireless sector, predicted Recon Analytics' Roger Entner. About a third of carrier capital expenditure budgets are dedicated to equipment, he said in an email. “Carriers have only a limited amount of capital expenditure budget and hence the build out of 5G networks will be slower than it would otherwise be with the effect of 5G in fewer places with slower speeds.”

ResearchandMarkets.com said Friday that in Q3, the largest network infrastructure providers worldwide remain “the usual trio: Huawei, Ericsson and Nokia.” China Comservice and ZTE “have been jostling for the 4th and 5th positions since early 2019,” it added.

In recent financial calls, most carrier and equipment supplier executives didn’t comment on tariffs' costs, nor did analysts ask about them. The exception was Ericsson CEO Borje Ekholm, who said on a recent call that the company is braced for U.S. tariffs. “We'll all have to see … how will this look in reality and then adjust as much as possible.” Ericsson officials noted that critical products like communications gear are sometimes exempted from tariffs.

Since commercial broadcasters depend on advertising from a wide range of industries, they are heavily exposed to economic fluctuations caused by tariffs, said BIA Advisory Services Managing Director Rick Ducey. Tariffs for China, Canada and Mexico on steel and other materials would likely affect the supply chain for automobile manufacturers, a key advertising category for broadcasters, Ducey said. Auto dealers are expected to spend $3.6 billion on media advertisements in 2025, he said, but a lower inventory of cars would lead to higher prices and fewer sales, which is likely to drive local dealers to reduce advertising. It's a “foundational premise” that ad buys are tied to revenue, Ducey said: “Advertising and marketing is a discretionary place to cut before you have to cut other kinds of core functions.”

Many broadcast advertisers are either retail stores or restaurants, which often depend on imports, Ducey said. In addition, consumer electronics, apparel and many other retail goods are largely imported. In the restaurant industry, tariffs could influence the cost of food. For example, “we get a lot of our avocados from Mexico,” he said. “If you go back to $50 avocados, that impacts the food supply chain and pricing, so that would impact restaurants that have to increase their prices or change their menus, and then that may impact their advertising behavior too.”

NAB didn't comment.

Uncertainty about what tariffs may end up in place for which countries and imports will also affect advertising spend, Ducey said, adding that he expects some companies and business leaders will delay launching advertising campaigns until there's more clarity. “They're thinking about advertising campaigns and making huge dollar commitments, and then saying, ‘Well, who knows what's gonna happen tomorrow when I wake up?’” It could be a slow first quarter for broadcast advertising revenue, he said. Tariffs have “system effects,” so “if you jiggle this over here, it jiggles 10 things over there.”