Alcatel Lucent's Bell Laboratory...An employee walks past banks of computer servers at the Alcatel-Lucent Bell Labs facility in Villarceaux, France, on Thursday, 24 May, 2012. Alcatel-Lucent, the Paris-based maker of telecommunications gear, has designed a router to be used at the center of Internet providers networks, a market dominated by Cisco Systems Inc. and Juniper Networks Inc. Photographer: Balint Porneczi/Bloomberg
In their letter, the companies said the imposition of 'a 10-25 per cent additional duty on networking products and accessories ... would cause broad, disproportionate economic harm to US interests' © Bloomberg

Cisco, Dell, Hewlett Packard Enterprise and Juniper Networks have issued a last-ditch appeal to the Trump administration to protect key products from being included on a list of $200bn in new tariffs on Chinese imports, amid growing anxiety in corporate America over the escalating trade war with Beijing. 

The four US technology companies said in a joint letter to Robert Lighthizer, the US trade representative, that tariffs on networking equipment would increase prices for consumers and delay investments — possibly leading to job losses for workers and reduced dividends for shareholders. 

“If USTR were to impose a 10-25 per cent additional duty on networking products and accessories, it would cause broad, disproportionate economic harm to US interests, including our companies and US workers, our customers, US consumers, and broader US economic and strategic priorities,” the letter, sent on Thursday, said. 

The warning came on the final day of a comment period called by the Trump administration to solicit views on the proposed new round of tariffs, which comes on top of $50bn in tariffs on Chinese imports which have already been put in place this year. At any point after Thursday’s deadline, USTR could press ahead with the new tariffs, which are expected to be met with retaliation from Beijing, sharply increasing trade tensions between the two giants of the global economy. 

The joint statement marks a departure from the approach taken by most large US companies, few of whose leaders have spoken out directly against the administration’s trade policy despite harbouring concerns about its impact on their businesses. 

Public statements of opposition from the likes of Lance Fritz, chief executive of Union Pacific, and Tom Linebarger, chief executive of Cummins, have been the exception, with many executives choosing to let their industry lobby groups or business advocacy groups such as the Business Roundtable and the US Chamber of Commerce make the argument. 

Josh Bolten, president and chief executive of the Business Roundtable, testified to the Senate committee on foreign relations in July that imposing Section 301 tariffs without serious negotiations “unnecessarily places US jobs, families and our economy in the crosshairs of a rapidly escalating trade confrontation”. 

But Cisco and its three partners in the letter felt the need to speak out individually about the dangers to their business posed by the tariffs, since the list takes aim at a wide range of components and finished products that are key to cloud computing data centres, which sit at the heart of today’s digital infrastructure.

Imports subject to the planned levies include servers, routers and switches, which handle data processing and communication. They also include components such as motherboards and memory modules, which are imported by big hardware makers to include in products built in the US, as well as cloud computing companies such as Google, Amazon and Facebook, which assemble machines for their own data centres. 

The tariffs would hit companies involved in building internet infrastructure at a critical time. The big US cloud companies, led by Amazon, Microsoft and Google, are in the middle of a capital investment boom, as they race to create cloud platforms to support both soaring demand for their own services and business from other companies looking to outsource their IT. That has also helped hardware makers such as Cisco rebound to their strongest growth for a number of years. 

Thursday’s letter — signed by Jeffrey Campbell, vice-president for government affairs in the Americas for Cisco; Michael Young, senior vice-president for global government affairs and public policy at Dell; Maria Cino, vice-president for corporate affairs at HPE*; and Meredith McKenzie, vice-president and deputy general counsel at Juniper — contained some blunt warnings about their sector’s prospects in a trade war with China.

They warned that as it became more expensive to operate data centres and switching stations, internet service providers would raise prices for internet and mobile service plans — and consumers would be “doubly taxed for their internet usage”. They also said the rollout of 5G technology would suffer a “detrimental impact” exactly at a time when the US technology sector is competing with China for primacy in that area. The companies also worried that “foreign competitors in third country markets” would gain market share if the tariffs were imposed, and their own reduced profitability could bring “hiring freezes, stagnant wages, and even job losses, as well as harm to investors such as reduced dividends and erosion of shareholder value”. 

On Thursday a survey from the American Institute of Certified Public Accountants showed rising concern about the possible impact of tariffs in the US business community. The percentage of executives expressing confidence about the economic outlook for the next year dropped 10 points in the third quarter from the start of the year, to 69 per cent, and just 4 per cent said tougher US trade policies would benefit their businesses, while 49 per cent said they would suffer. 

Other industries have echoed the networking companies’ prediction that the cost of higher tariffs would be passed on to consumers, with businesses from Walmart to Whirlpool announcing price increases in recent months.

*This article has been amended to clarify that the signatory is Hewlett Packard Enterprise

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