Treasury Secretary Steven Mnuchin said on Friday that tariffs slated to hit imports of Chinese goods next week will not go into effect.The announcement came as President Donald Trump said there is a “very substantial phase one deal” between the two superpowers after high-level talks this week.

The U.S. had previously threatened to increase duties on $250 billion worth of Chinese goods from 25% to 30% on Tuesday.

Friday’s announcement does not have any bearing on a separate tariff hike set to kick in on Dec. 15, U.S. Trade Representative Robert Lighthizer said. Those tariffs will apply at a 15% rate to $160 billion worth of Chinese imports.  This tax hike is a surely more agreeable scenario .Those tariffs, of 15%, apply to about $112 billion worth of Chinese goods.

The United States announced it was set to impose a 25% tariff on over 800 categories of Chinese goods. These tariffs included nearly every component that goes into the manufacture of any piece of electronic hardware, from resistors to capacitors, semiconductors to microcontrollers, and even the raw components that are turned into printed circuit boards. These tariffs would have increased the cost of materials for electronics, even if those electronics are ultimately manufactured in the United States because suppliers and subcontractors must source their materials from somewhere, and more often than not, that place is China.

An email distributed by Moog Music  asked their supporters to contact their senators and representatives.  Small companies like SPB Global find themselves nearly paralyzed in business because there was little growth due to fear.  “There was a stillness in some sectors of the market”  said Susan Bernard, CEO.

In the world of musical synthesizers, there is no bigger name than Moog. The company was founded in the 1950s manufacturing theremins, and in the 1960s, production moved to synthesizers. The famous Minimoog, launched in 1970, has been featured on tens of thousands of albums. Modern music simply wouldn’t exist without Moog synthesizers. After a buyout, mismanagement, and bankruptcy in the 1980s, the company was reborn in the early 2000s, moved into a beautiful factory in Asheville, North Carolina, and has gone on to produce some of the most popular synthesizers ever made.

The company’s statement says these new tariffs will, ‘immediately and drastically increase the cost of building our instruments, and have the very real potential of forcing us to lay off workers and could.. require us to move some, if not all, of our manufacturing overseas.  Moog says they source half their PCBs and a majority of other materials domestically, already paying up to 30% more than if the PCBs were sourced from China. However, because the raw materials for PCB manufacture are also sourced from China, board manufacturers for Moog’s synths will be forced to pass along the 25% tariff to their customers.

The threat of Moog being forced to move production of their instruments to China is real. Like cell phones, laptops, and other finished goods, synthesizers are not covered by the new tariff. As noted by Bunnie Huang, these tariffs have the perverse incentive of shifting US manufacturing jobs to China.

These tariffs have been a point of contention for the electronics and engineering communities. Anyone can easily pull up the distributor information from a Mouser or Digikey order and find the country of origin for an entire Bill of Materials. It has already been confirmed that most of the FR4 and other raw components that go into manufacturing PCBs in the United States come from Chinese suppliers. These items can be cross-referenced with the list of items that will be subject to a 25% tariff . Manufacturing electronics in the United States, even if you get your PCBs from US manufacturers and parts from US suppliers.

The good news is we know who our trusted CN partners are and we will continue to develop strategic relationships.

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