US / China Tariffs March 2018

By: John Honovich, Published on Mar 23, 2018

On March 22, 2018, the US issued a Presidential Memorandum on the Actions by the United States Related to the Section 301 Investigation, with 3 directives:

  • A consideration to increase tariffs on goods from the PRC (China)
  • Pursue dispute settlement in the WTO
  • Restrictions on PRC investment/acquisition of US companies

The memorandum based this on 4 findings:

  • "China uses foreign ownership restrictions, including joint venture requirements, equity limitations, and other investment restrictions,"
  • "China imposes substantial restrictions on, and intervenes in, U.S. firms’ investments and activities"
  • "China directs and facilitates the systematic investment in, and acquisition of, U.S. companies and assets by Chinese companies"
  • Cybersecurity: "China conducts and supports unauthorized intrusions into, and theft from, the computer networks of U.S. companies."

This action has become global news in politics, technology, and business domains as the impact of these actions are assessed.

In the video surveillance market, China has become a major global force. Led by Chinese government-owned Hikvision, China has become the biggest global market for video surveillance, with the biggest manufacturers.

But how will the US memorandum impact video surveillance supplier and buyers? In this note, we examine the factors in play.

Tariffs Not Determined Yet - List By April

The most notable point is that the tariffs are not yet set and are part of a negotiation process (e.g., the threat of tariffs may prompt concessions from the PRC, which Chinese state-run media has acknowledged as an option). By April 6, 2018 (15 days after the memorandum issued), the US will "publish a proposed list of products and any intended tariff increases". 1,300 products are being targeted but what they specifically are has not been disclosed. After the list is published, US industry will have 30 days to review and respond, with an expectation that the list would be 'watered down'.

"Made In China 2025" Targeted

Get Notified of Video Surveillance Breaking News
Get Notified of Video Surveillance Breaking News

"Made In China 2025" is a PRC program that provides heavy subsidies to Chinese manufacturers, consisting of:

large, low-interest loans from state-owned investment funds and development banks; assistance in buying foreign competitors; and extensive research subsidies, all with the goal of making China largely self-sufficient in the targeted industries.

the Chinese government’s plan says Chinese industries that benefit should own as much as 80 percent of their home market in just eight years.

lead to government-subsidized global players that would compete unfairly.

This, unsurprisingly, accurately describes the situation in the video surveillance market.

The US is focusing its tariffs on 10 industries part of the "Made In China 2025" program as explained in the US Senate finance committee hearing (57 min mark). Video surveillance falls under the "advanced information technology" industry segment of the program.

Hikvision Major Beneficiary of "Made In China 2025"

Hikvision is a major beneficiary of the program, frequently touting it inside of China:

Indeed, Hikvision's Chairman (who recently joined the Chinese national government) has been touting Hikvision's progress with "Made In China 2025" program on Hikvision China's website in 2016 and Hikvision's government owner website this month.

Cameras and Recorders Impacted by Tariffs?

It is hard to determine if 'regular' cameras and recorders will be impacted by these tariffs. Will the US government categorize them as 'advanced information technology'? Is the cybersecurity risk of these products significant enough to warrant inclusion based on those concerns cited in the memorandum?

Deep Learning / AI Almost Certain

On the other hand, deep learning and AI are almost certainly going to appear on the list as they are core components of emerging technology. Even if the tariffs are enacted here, the question will be how much of an impact 25% will be for these products. The willingness of Dahua and Hikvision to sell at greatly reduced prices and with greater marketing spend than their Western competitors is clear. 25% is likely to close the gap somewhat but given how early deep learning is for video surveillance it is hard to determine the exact impact. Indeed, it still remains to be seen how well their deep learning works.

Marketing / Branding Impact Is Key

More important than the actual tariffs itself is the potential marketing / branding impact. This could go either way:

The negative case for the US: Trump, being divisive, could make the United States be seen as a bully against China plus imposing a tax 'against' American consumers. This could effectively backfire, allowing the PRC to go forward with no tariffs applied, a backlash against the US and a clear path for continued Chinese manufacturer international expansion.

The positive case for the US: These actions could engender a greater awareness of the unfair and anticompetitive practices that China has pursued for years that have damaged various foreign countries companies, worsening as China's economy has become larger and the country has become more authoritarian. This could motivate more buyers, regardless of tariffs, to prefer non-PRC products.

It is too early to determine the ultimate impact but the stakes and attention have just gotten much higher.

Comments (60) : Members only. Login. or Join.

Related Reports

Hikvision Put on US DoD "Communist Chinese Military Companies" List, Faces Risk of Presidential Sanctions on Jun 26, 2020
The US DoD has put Hikvision on a list of "Communist Chinese Military...
Sunell is The First China Manufacturer to Market NDAA Compliance on Jul 30, 2020
Most China manufacturers are going to be impacted by the NDAA 'Blacklist...
Costar Technologies / Arecont H1 2020 Financials Examined on Sep 16, 2020
Costar's financial results have been hit by the coronavirus with the company...
Infinova, March Networks and Swann H1 2020 Financials Examined on Sep 02, 2020
While Dahua and Hikvision, helped by fever camera sales, are recovering from...
Netposa Stock Surges 46% After US Human Rights Abuse Sanctions on May 27, 2020
Last Friday, the US government announced it would sanction PRC video...
Exposing Fever Tablet Suppliers and 40+ Relabelers on Aug 05, 2020
IPVM has found 40+ USA and EU companies relabeling fever tablets designed,...
SIA Coaches Sellers on NDAA 889B Blacklist Workarounds on Aug 05, 2020
Last month SIA demanded that NDAA 899B "must be delayed". Now that they have...
Deep Sentinel Presents Crime Response For Business on Jun 11, 2020
Deep Sentinel presented its anti-intrusion and live response for home and...
U.S. Government Accountability Office Urges Facial Recognition Regulation on Aug 27, 2020
The US Government Accountability Office (GAO) is urging facial recognition...
US Passes Uyghur Human Rights Law Condemning Mass Surveillance on Jun 18, 2020
The US government has passed the Uyghur Human Rights Policy Act of 2020,...
Camect Presents Residential Market Smart NVR with AI Analytics on Aug 19, 2020
Camect presented its AI video analytics enhanced NVR at the May 2020 IPVM...
"Beyond Reprehensible" Email Leads To Boycott of CPI Security on Jun 10, 2020
One of the largest US security integrators, CPI Security, with $100+ million...
China Dali Fever Cameras and Booming Sales Examined on Sep 11, 2020
Zhejiang Dali, one of China's original thermal technology developers, has...
JCI / Tyco Security Products Layoffs on Jun 05, 2020
Johnson Controls / Tyco Security Products has confirmed COVID-19 related...
China General Chamber of Commerce Calls Out US Politics on Sep 24, 2020
While US-China relations are at an all-time low, optimism about relations...

Recent Reports

Hanwha AI Object Detection Tested on Sep 28, 2020
Hanwha has added detection and classification of people, cars, clothing...
Favorite Access Control Manufacturers 2020 on Sep 28, 2020
200+ Integrators told IPVM "What is your favorite access control management...
New Products Show Fall 2020 Starts Tomorrow! on Sep 27, 2020
Tomorrow, IPVM's sixth online show will feature New Products from over 25...
OnTech Smart Services Partners With Google and Amazon To Compete With Integrators on Sep 25, 2020
A pain point for many homeowners to use consumer security and surveillance is...
The Future of Metalens For Video Surveillance Cameras - MIT / UMass / Immervision on Sep 25, 2020
Panoramic cameras using 'fisheye' lens have become commonplace in video...
Hikvision Sues Over Brazilian Airport Loss on Sep 24, 2020
Hikvision was excluded from a Brazilian airport project because it is owned...
China General Chamber of Commerce Calls Out US Politics on Sep 24, 2020
While US-China relations are at an all-time low, optimism about relations...
Verkada Disruptive Embedded Live Help on Sep 24, 2020
Call up your integrator? Have someone come by the next day? Verkada is...
IP Networking Course Fall 2020 - Last Chance - Register Now on Sep 23, 2020
Today is the last chance to register for the only IP networking course...
Drain Wire For Access Control Reader Tutorial on Sep 23, 2020
An easy-to-miss cabling specification plays a key role in access control, yet...
Norway Council of Ethics Finds Hikvision Human Rights Abuses "Ongoing" on Sep 23, 2020
Hikvision's involvement in "serious human rights abuse" in Xinjiang is...
IPVM Camera Calculator User Manual / Guide on Sep 23, 2020
Learn how to use the IPVM Camera Calculator (updated for Version 3.1). The...
Installation Course Fall 2020 - Save $50 - Last Chance on Sep 22, 2020
This is a unique installation course in a market where little practical...
SimpliSafe Business Security Launched Examined on Sep 22, 2020
SimpliSafe has launched "SimpliSafe Business Security" that the company...
FLIR CEO: Many New Fever Entrants "Making Claims That The Science Just Won't Support" on Sep 22, 2020
FLIR's CEO joins a growing number calling out risks with fever / screening...