September 7, 2018

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TechNet Warns Trump Administration About Economic Harm of Data Center Tariffs

Washington, D.C. — TechNet, the national, bipartisan network of innovation economy CEOs and senior executives, is urging the Trump Administration not to move forward with proposed tariffs on several technology products and components essential to the construction and operation of data centers.  In its latest rulemaking, the U.S. Trade Representative (USTR) has proposed implementing a 25 percent tariff on Chinese imports worth approximately $200 billion annually.

“Data centers are one of the many important ways technology companies are creating jobs and expanding opportunity in communities across the country,” wrote TechNet President and CEO Linda Moore in official comments submitted to USTR.  “Data centers are not only critical 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.

“Tariffs on essential data center components, such as servers and transmission devices, threaten to stall this engine of economic growth by disrupting supply chains, increasing costs through de facto taxes, and injecting uncertainty into business operations and local economies that host data centers,” Moore added.

The full text of TechNet’s letter is below and a PDF is available here.

September 6, 2018

Ambassador Robert E. Lighthizer
United States Trade Representative
Office of the United States Trade Representative
600 17th Street, NW
Washington,D.C. 20508

RE: Office of the United States Trade Representative’s (USTR) proposed tariffs on data center components

USTR Docket No. USTR-2018-0026

Dear Ambassador Lighthizer:

TechNet is the national, bipartisan network of innovation economy CEOs and senior executives.  Our diverse membership includes dynamic American companies ranging from startups to the most iconic companies on the planet and represents over three million employees and countless customers in the fields of information technology, e-commerce, the sharing and gig economies, advanced energy, cybersecurity, venture capital, and finance.

I write today to express our industry’s concerns with the Trump Administration’s proposal to implement a 10 percent duty on Chinese goods with an annual trade value of approximately $200 billion, in addition to the duties already being applied to $50 billion worth of Chinese goods.  While we share the administration’s concerns about China’s trade practices regarding the forced transfer or theft of U.S. technology and intellectual property, we continue to believe that imposing sweeping tariffs is a mistake and will not help secure meaningful changes from the Chinese government.  Rather, tariffs will lead to higher prices, slow the growth of U.S. economic output, and weaken demand for American products at home and abroad — all of which will hurt U.S. consumers, workers, and businesses of all sizes.  In fact, one recent study shows that tariffs will slow U.S. economic output by $322 billion over the next decade.

In this letter, we want to highlight several examples of how increased tariffs would cost American jobs, disrupt economic activity across several sectors throughout the country, and harm U.S. leadership in technology without helping the underlying investigation.  

Specifically, we are concerned about the following proposed tariffs on servers, transmission devices, and other key computing components that make up the digital infrastructure needed to build and operate data centers:

• Servers (HTS 8471.50.01)
• Transmission devices (HTS 8517.62.00 and 8517.69.00)
• Key server components (HSTUS 8471.70.50, 8473.30.11, 8473.30.51, 8504.40.60, 8504.40.85, 8523.52.00, 8537.10.91, 8544.42.20, and 8544.42.90)

Data centers are one of the many important ways technology companies are creating jobs and expanding opportunity in communities across the country.  They are the lifeblood of an increasingly data-driven economy and can be found in every state.  As you know, 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 critical 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.  Tariffs on essential data center components, such as servers and transmission devices, threaten to stall this engine of economic growth by disrupting supply chains, increasing costs through de facto taxes, and injecting uncertainty into business operations and local economies that host 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.  If critical pieces were to be held up for delivery at a later date with higher, more unpredictable costs, companies would be incentivized to make investments and create jobs in other countries where such needless uncertainty surrounding data centers does not exist.

In essence, should these tariffs be implemented, they 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.

To avoid a prolonged trade war that hurts American consumers, workers, and job creators — and leads to situations where the government is picking industry winners and losers to bail out — the administration should end its policy of imposing tariffs and instead work with our European and Asian allies to pressure China to change its trade practices.  Most immediately, the administration should not move forward with the proposed tariffs listed in this letter that would jeopardize investments being made to construct and modernize critical data centers in every state across this country.

As this process continues, we encourage you to keep an open dialogue with the business community in order to find more targeted solutions that address our shared concerns about China’s trade policies and practices while protecting American interests and jobs.

Thank you for your consideration on this important matter.

Sincerely,

Linda Moore
President and CEO


About TechNet
TechNet is the national, bipartisan network of technology CEOs and senior executives that promotes the growth of the innovation economy by advocating a targeted policy agenda at the federal and 50-state level.  TechNet's diverse membership includes dynamic American companies ranging from startups to the most iconic companies on the planet and represents over three million employees and countless customers in the fields of information technology, e-commerce, the sharing and gig economies, advanced energy, cybersecurity, venture capital, and finance.  TechNet has offices in Albany, Austin, Boston, Chicago, Olympia, Sacramento, San Francisco, Silicon Valley, Tallahassee, and Washington, D.C.

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