October 29, 2018

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Tariffs on Data Centers Threaten Jobs in Every State

By
Linda Moore
Morning Consult

(This article originally appeared in Morning Consult on October 29, 2018)

The U.S. tech industry creates jobs and opportunities across the country for millions of Americans — from the Rust Belt to the Sun Belt, from the Mid-Atlantic to the Midwest.  This is the result of new tech hubs emerging, the internet empowering startups to spring up everywhere, and venture capital investments gravitating toward these growing entrepreneurial centers.

One important way tech companies are expanding in communities across the country is through data centers, which are the lifeblood of an increasingly data-driven economy and can be found in every state.  Data centers are like modern day warehouses where companies house their critical information technology operations, storing and managing data for both their organizations and their customers.

One study shows that, once operational, the average data center generates $32.5 million worth of local economic activity each year.  Further, during the construction phase, each data center generates nearly $10 million in revenue for state and local governments, while employing an average of 1,688 workers.

Data centers are not only important to tech firms and workers, they are utilized by manufacturers, farmers, and businesses across every sector to store and manage the data they need to run their operations more effectively.  Data centers are also major construction projects that provide well-paying opportunities for builders, contractors, and workers in many other trades.

Despite the proven economic impact of data centers — and the opportunity they have brought to American workers in every region — the Trump administration’s tariffs are threatening to stall this progress by disrupting supply chains, increasing costs through de facto taxes, and injecting uncertainty into business operations and local economies that host data centers.

Specifically, the Trump administration has implemented tariffs on the very servers, transmission devices, and other key computing components that make up the digital infrastructure needed to build and operate data centers.

Data centers are complicated supply chain projects that rely on the absolute certainty of receiving key components in a timely and cost-effective way.  Imagine trying to construct a 10,000-piece puzzle by a certain deadline, only to have critical pieces held up for delivery at a later date with higher, more unpredictable costs.  This is a recipe for encouraging companies to make investments and create jobs in other countries where such needless uncertainty does not exist.

In essence, these tariffs will not only hurt the American tech sector the administration is working to protect from China’s unfair trade practices; they will hurt many more workers across various sectors whose operations rely on cloud computing and data management tools.

There is no question pressure on China is needed to address significant concerns about their trade policies and practices.  However, imposing sweeping tariffs continues to be a mistake.  There are countless examples throughout history that prove tariffs do not work.  In fact, one recent study shows that tariffs now will slow U.S. economic output by $332 billion over the next decade.

A prolonged trade war will hurt American consumers, workers, and job creators, and has already led to a situation where the government is picking industry winners and losers to bail out.  The administration should immediately end its tariffs policy and instead work with our European and Asian allies to pressure China to change its trade practices.  While thousands of products have already been subjected to hundreds of billions of dollars worth of tariffs, a good place for the administration to start reversing course is on the tariffs that are jeopardizing investments being made to construct and modernize critical data centers in every state across this country.

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