back to article China trade tariffs? Fuhgeddaboudit, say Cisco execs. We, er, shifted some production

Cisco has said US president Donald Trump's latest trade tariff hike on Chinese imports barely forced it to up its own prices because it had shifted some production outside the Middle Kingdom in anticipation of the policy. At the close of last week, the US slapped a 25 per cent duty on $250bn worth of stuff – some 5,200 …

  1. Blockchain commentard Silver badge

    To counter the 10% hike, Cisco raised their own prices nearly 8%. To me, that makes an 18% increase to the consumer. Nice of Cisco to use Trump as a distraction to up their own profits.

    1. Prst. V.Jeltz Silver badge

      To me, that makes a 80% of a 10% production cost increase passed on to the customer , resulting in an 8% increase in retail price

      1. Anonymous Coward
        Anonymous Coward

        Agreed, 8% rise for the customer. Cisco will have sliced and diced, calculated the profits it makes on different lines. Cisco will not have lost out here.

        1. Pascal

          They probably didn't limit the 8% hike to only things produced in China, upping their profit margin by 8% for everything else?

    2. jgarbo
      Mushroom

      Trump is a genius on trade! He really showed those devilish, crafty....Americans...The Chinese are shaking...with howls of ...laughter. Next, 100% tariff on Americans. They remember that in 2020.

  2. macjules Silver badge

    They MAKE products??

    Given how many bugs there are in their routers, there was I thinking that Cisco products were put together by several million monkeys, working in a secret bunker somewhere in Darkest Africa.

    1. Keith Oborn

      Re: They MAKE products??

      Old (and somewhat apposite) joke: "What's the difference between Cisco and Huawei? They both design routers, but Huawei actually make them as well"

  3. Trollslayer Silver badge
    Flame

    Screwdriver job

    Everything except final assembly done in China, that gets done next door.

    1. Wellyboot Silver badge
      Trollface

      Re: Screwdriver job

      By the Norks?

    2. Anonymous Coward
      Anonymous Coward

      Re: Screwdriver job

      Don't you mean tape?

      "Final assembly" can often mean "Sticker applied and placed in customer packaging"

      Anon for reasons

      1. teknopaul Bronze badge

        Re: Screwdriver job

        Yeah, you wonder how else Cisco can move production in six months.

      2. Anonymous Coward
        Anonymous Coward

        Re: Screwdriver job

        > "Final assembly" can often mean "Sticker applied and placed in customer packaging"

        ... and gets done in Mexico (same goes for HP and probably MANY others that make product in China)

        also anon... for similar reasons

    3. Fred Goldstein

      Re: Screwdriver job

      The irony is that there isn't all that much Chinese content or value in a lot of these products, especially the iPhone. The real hardware value is in the semiconductors, which are rarely Chinese. In the case of routers, it's also mostly in the software. An iPhone is assembled by Foxconn in China for maybe $5, using lots of Korean, American, German, Taiwanese, and other parts. So the tariff is really >100% weighed against the Chinese content.

      But that does suggest that "final assembly" can be moved elsewhere without changing much, especially for Cisco, whose packaging is not at all exotic (PC boards and SFP sockets in a metal case). Maybe the boards can be stuffed in China (harder to move) while the case is screwed shut in Vietnam or Mexico. I seem to remember that loose screws were enough to deem a car a "kit" in the UK. Of course assembled British cars had that problem too... ;-) (sorry, we Gringos aren't known for having built the best-made cars but we could at least look down on English ones).

  4. herman Silver badge

    This is exactly the thing - everybody that does business with the USA will shift production out of China to Taiwan, Japan, Singapore, Malaysia...

    The effect on the Chinese economy is huge. China will have to come to the table and talk to the USA about the trade imbalance problem, which currently runs at 1 billion Dollars per day, which is obviously unsustainable, but which will drop like a stone whether they do or don't.

    1. teknopaul Bronze badge

      Another impact is that Chinese tat is 30% more expensive in the US making some buisness 30% more expensive for US corps. Resulting in moving production that uses tech outside the US to anywhere else in the world that is convenient.

      E.g. infra for outsourcing centers just cost just got comparativly 30% cheaper.

      You cant win a trade war unless there are only two sides.

    2. veti Silver badge

      Maybe, maybe not. I note the most immediate effect of Trump's policies was that the trade balance with China actually got worse in 2017 and 2018. (Figures here, if you're interested.) And the US balance of trade with the world as a whole has deteriorated badly in the past two years. (Source.)

      So who has the upper hand in these talks? My money is on "the side that's holding more than $1.1 trillion in IOUs from the other".

      1. Rich 11 Silver badge

        My money is on "the side that's holding more than $1.1 trillion in IOUs from the other".

        I'm sure Trump has a great plan, the best plan, for countering this threat. "No, that's not my signature. Nor is this. Or this. These IOUs are worthless. Here, let me tear them up for you."

      2. Reg Reader 1

        @veti

        It's important to keep in mind that Trump is a Bannon fan and Bannon wants to deconstruct the US economy/world economy and turn it all back to the times of the robber barons. Aside from the fact that there's nothing any nation can do with any nation that has nukes, if the nation with nukes is run by a crazy despot. North Korea is a good example of that. To contrast that, Ukraine is a good example of living near that and giving up its nuclear arsenal.

        The taxation system and corporations hiding money and having an ever decreasing tax burden certainly needs changing, in NA at the least, but I think Bernie Sanders ideas of a new New Deal was the way that should have played out. Of course, the robber barons didn't want that and where there's private money and lobbying allowed in politics we get control by rober barons.

    3. Steve Davies 3 Silver badge

      China coming to the table

      ROFL

      How many IOU's do the chinese hold that relate to US Gubbermit Debt? Unless the USA DEFAULTS on its debt which will trigger a worldwide depression that would make the 1930's seem like childs play there will come a time when those debts have to be settled.

      The Chinese could basically foreclose most of the economies in the world (apart from maybe Germany and Norway) should the decide to do so. Trump is like a little kid in a urinal and seeing how far his piss can go up the wall. There will always be someone that can beat it but he thinks that his mark is untouchable.

      1. Reg Reader 1

        Re: China coming to the table

        I upvoted you, because if Trump was sane you'd be correct, but is Trump smart enough to understand that or care how that would most of the world's population? I'll bet he's worked out something with his friend Vlad wherein he and the kids can move in with his buddy in case he's able to pull that off. What I wonder is does Trump believe that his buddy would honour a deal like that.

  5. Roger B

    Hang on just one moment

    I assumed that Cisco kit was made in the US and that's what this whole tariff raising, Huawei fear mongering was about, but Cisco make their kit in China? which made them a target for the tariffs, and so US telecoms networks as well as other commercial and private customers paid more due to Cisco putting their prices up. So honest Joe US taxpayer gets hit by an increase on his telecoms bill even if the providers only buy Cisco kit.

    And on top of that the Cisco kit is more buggy and the bugs/backdoors are known globally where as the Huawei kit has yet to be proven to have any actual backdoors installed?

    There is that line from Sneakers about the US government agencies just want to break the codes of the other US agencies? Here the US just wants to know it can easily spy on its own citizens?

    1. Bitsminer

      Re: Hang on just one moment

      "I assumed that Cisco kit was made in the US "...

      Not correct. Cisco outsources manufacturing to a variety of manufacturing specialists, some in China and some with factories in China but HQ is elsewhere and some outside of China in US-approved free-trade areas (Malaysia etc).

      The firmware (bugs) come from good old U.S. of A.

    2. Pascal Monett Silver badge
      Facepalm

      Re: Hang on just one moment

      "Cisco make their kit in China"

      Don't you just love the irony of the situation ? We're supposed to believe that Huawei kit made in China is an existential threat to US communications, but Cisco kit made in the same country is clean as a whistle.

      Yeah, sure. Pull the other one.

  6. Allan George Dyer Silver badge

    Hold on...

    So there's now a fully-equipped factory for sale and, coincidentally, recently-unemployed fully-trained workers nearby? Sounds like the world will soon be divided into areas fully-served by cheap 5G kit, and the USA (and supporters).

  7. Phil Kingston Silver badge

    I'm guessing it'll be easier to install NSA wizardry if the kit's made in the US.

  8. Gonzo_the_Geek

    "and then the third is we'll make pricing adjustments where necessary, if needed."

    Nice tautology there, Mister.

  9. localzuk

    Entirely pointless trade war

    Putting tariffs on China is entirely pointless - it won't cause China much lost sleep, but it will cause major hassles in the USA. Not many companies will move their manufacturing to the USA from China, when there are countries all over the world sat waiting to welcome those companies with open arms.

    1. Anonymous Coward
      Anonymous Coward

      Re: Entirely pointless trade war

      The US government would be happy as long as the manufacturing moves out of the China.

  10. Guus Leeuw

    Don't be daft

    Dear Sir,

    "Production shifted to nearby countries"...

    As some already suggested: that means that China-plants now ship to Taiwan or some such where the very minimum of work is carried out and the product is shipped to the US, avoiding tariffs.

    Please, people, do not forget that China has a handle on *a lot* of minerals and materials needed to make semiconductors and complete computers. Their mining operations are huge and global. They are the production plant of the world. Do you think it would be easy, completely without China, to manufacture stuff? Let alone setup a complete new plant in a similarly low-cost country? How about skills and supply-chain? Somewhere in the world, Germany perhaps, there would have been a huge windfall because companies are all of a sudden ordering new production kit. However, Germany's GDP only rose by less than 1%, so not a windfall at all. Remember the time when companies started to move their production lines to China? That was a *very* *good* time for Germany. I really did not see that happening this time around. *And* it took a lot longer than 6 months.

    If Trump was serious about his China obsession, he would make sure tariffs are applied to those categories for any product or parts thereof that have been manufactured inside China. But that's not happening. The tariffs are applied to products coming directly from China. So what anybody should do: set up a hub in Taiwan, sail items across from China, apply a sticker to the products and put them in a box, using the same ship that's waiting in the port sail the products onwards to the US.

    Just my 2 cents, but really, this is more of the cloak and daggers stuff that popularist politicians pull off these days, making sure the masses are kept stupid and dumb and full of fear for one thing or another, so that they are easier controlled. Religions started that 2000 years ago, and we still haven't learned to toss the shackles of fear?

    Guus

    1. Boring Bob

      Re: Don't be daft

      "Religions started that 2000 years ago". What a ridiculous statement. Firstly, why should all religions suddenly start doing this 2000 years ago? Secondly, religions do not actually do anything, they are abstract concepts. It is people who put fear in other people, they may try to abuse the concepts of different religions to manipulate people for there own ends, however all ideologies and objects are vunerable to this type of manipulation why pick on religion?

      "politicians pull off these days". Are you really so naive as to believe that there was ever a time when humans didn't do this?

  11. Anonymous Coward
    Anonymous Coward

    There's just a leeeettle untold problem with these industry ideas (and it's not just Cisco)

    To shift production to another country on short notice is not just a lot of upheaval (read: costs), but it also results for a while in production instability while processes, staff skills, QA and facilities get up to speed.

    That either translates in yield problems if noticed (read: more costs), or reliability problems if not (read: more risk).

    I'd be very careful putting gear from a recent production change in places where you cannot afford to have it fail or where it's hard to get to.

    It's not as simple as they make it out to be to just load the whole show into a container and move it abroad. Even established facilities will need to expand first before they can pick up the extra work.

    1. Jimmy2Cows Silver badge

      Re: There's just a leeeettle untold problem with these industry ideas (and it's not just Cisco)

      Nah. As others have suggested, they'll still make the stuff in China, then ship it to Taiwan where they slap a "Made in Taiwan" sticker on it and shove it in a different box. Simples. At least until Uncle Sam investigates the supply chain.

      1. Reg Reader 1

        Re: There's just a leeeettle untold problem with these industry ideas (and it's not just Cisco)

        @Jimmy2Cows

        No fear of, "...Uncle Sam investigates the supply chain." Trump will have gutted that Department with budget cuts.

  12. Anonymous Coward
    Anonymous Coward

    Sooooo, following all the fuss over not buying Huawei kit because they are Chinese and therefore a security risk, it turns out that Cisco kit is manufactured in China? So are we banning Cisco kit now as well?

  13. Torquemada_131
    Pint

    All the commentators who are waving their arms in the air and getting sweaty under the collar about how "China will suffer great pain" and "China can't afford to stand up to the Mighty US for long",.... etc have little appreciation for factual reality or differing cultural attitudes.

    Look up "Rare-Earth Elements" in Wikipedia.... specifically in regard to the manufacture of Electronics.

    Quote from The Economist" : "Slashing their exports of rare-earth metals… is all about moving Chinese manufacturers up the supply chain, so they can sell valuable finished goods to the world rather than lowly raw materials." Furthermore, China currently has an effective monopoly on the world's REE Value Chain. (all the refineries and processing plants that transform the raw ore into valuable elements).

    China recognise that, whilst the rest of the world have Oil deposits,... China has the majority in REE's.

    The reason so many mobile phones and devices are made in China is part of the deal they struck with manufacturers to get access to these elements.

    Negotiation to achieve "mutually beneficial outcomes" strikes me as a better starting point than irrelevant tantrums and empty threats.

    As an ex-Cisco employee, I'm very aware of Huawei indiscretions,... China treats IP the same way as Donald T. Rump treats Subpoenas,.... The fact is,... you'll still catch more Bees with honey than you will with vinegar.

    1. This post has been deleted by its author

  14. DontFeedTheTrolls Silver badge
    Terminator

    There's 7 billion people in the world, only 327 million live in the US (<5%). While those Americans may account for a higher share of the world market per head, the rest of world is a growing market.

    Now, Mr Trump, does the name Custer ring any bells?

  15. Anonymous Coward
    Anonymous Coward

    So, another company that's moved production from China to Vietnam.

    I'd say that it's China's increasing government paranoia adding restrictions that's making the business environment increasingly difficult, but it's probably just that it's much cheaper in Vietnam now.

  16. fredesmite

    The 25% tariffs on china

    Should be a real hoot. Includes all electronic equipment and components.

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