RESOLVING THE LEDGER
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Another day, another tariff on tech from President Donald Trump.
On Thursday, Trump announced new tariffs specifically targeting drones made outside of the United States, as well as their components.
So, what drones are now subject to tariffs and what will the impact be?
Trump has now imposed a 100 percent "ad valorem" tariff on drones that are "particularly sensitive" to national security concerns. An ad valorem tariff basically means the the tariff is calculated as a percentage of an item’s customs value. Essentially, a 100 percent ad valorem tariff doubles the price of the drone.
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Smaller drones that are considered to be "not particularly sensitive" to national security will face a 25 percent tariff.
Drones and components from the European Union, Japan, Liechtenstein, South Korea, Switzerland, and Taiwan will be subject to a 15 percent tariff. Drones from the United Kingdom will only face a 10 percent tariff.
The 100 percent tariff will go into effect in 21 days, while the tariffs on smaller drones will take effect in 180 days.
Based on the details and carve-outs, it seems pretty clear that these tariffs are specifically meant to target drones imported from China. Some of the biggest drone manufacturers in the world, such as DJI, have already been banned from releasing new products in the U.S. by the Trump administration.
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These tariffs will further complicate things for those companies. These additional costs imposed on older, existing product lines that were already approved for sale in the U.S. will likely force companies to raise prices. As a result, older products could be sold to U.S. customers at higher prices than newer models cost outside the country.
Will these new drone tariffs stick? Trump has faced legal issues with his tariffs before. Recently, the Trump administration was forced to refund $100 billion in tariffs that the Supreme Court had struck down. However, those billions of dollars were refunded to the affected companies, not the consumers who had paid higher prices because of the tariffs.
So, regardless of what the future holds for Trump's drone tariffs, the biggest losers are the American people.
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