When U.S. tariffs were imposed on products originating from China last month, price increases went into effect for over 30 of our component suppliers. If the trade war isn’t resolved by January 1, 2019, the tariff is expected to rise another 15%.

For companies that deploy hardware-based solutions like our customers, higher component costs will increase overall system costs. The affected components include storage devices (both SSD and HDD), CPU coolers, heatsinks, LED fans, and chassis, and we’re seeing a larger impact on cables, power supplies, graphics cards, and motherboards.

Price Adjustments Only as Tariffs Are Imposed

From a cost management perspective, we’ve chosen to take the road less traveled and shield customers from a fixed percentage increase on all components across the board. Instead, to minimize the impact of tariffs, we’ve invested hundreds of hours digging in and only applying the tariff on affected components.

Here’s the 411:

• MBX Hatch, our cloud-based application for program management, offers a feature to show which components on a BOM have been impacted and the incremental price change. (If you’re not familiar with our Hatch toolset and are curious to learn more, read about Hatch here.)
• Our supply chain team is adding tariff updates in our purchasing system as they are imposed by suppliers, however, our strategy is to batch updates to customers to avoid frequent price changes.
• Our platform engineers can look at transitioning some system components to alternative products with less impact from tariffs, provided they don’t degrade hardware performance.
• Our account managers are working with customers who want to forecast into January 2019 (in advance of the next tariff increase) to buy inventory at better prices.

Mitigation Measures with Suppliers

Our internal measures to minimize tariff-related increases are resource intensive, but it doesn’t end there. We’re also working closely with suppliers to find alternate ways to manage customers’ costs, for example:

• Some vendors with manufacturing facilities in multiple countries are looking at shifting production away from China to skip the tariffs where they can.
• Some vendors in the US can purchase and import their own manufactured products built in China and then resell them to us, passing along the tariff at their cost.

What’s to Come

The process of applying tariffs at the component level is painstaking, but our iterative approach better manages customers’ costs. Price increases to date have not been uniformly imposed and as suppliers get up to speed increases will continue in Q4 2018. If the January tariff goes into effect, we expect the 15% increase to hit all at once.

Want to find out if your hardware partner is inflating your hardware costs above and beyond the tariffs to boost their profits? We can take a look at your BOMs against our tariff database and let you know how things stack up. Contact us to get the ball rolling.