American Tech Able To Outflank

I understand that the U.S. administration wants to bring back American manufacturing, but that will not include Silicon Valley manufacturing.

There is a higher likelihood that if China is a no-go zone, American tech companies will venture out to a low-tariff, cheap labor country to continue their path to profits.

If you look through the numbers, it doesn’t make sense for American tech companies to manufacture goods in America.

The costs are too prohibitive.

Silicon Valley tech firms that are public on the New York markets have a fiduciary responsibility to shareholders to sustain short-term profits.

There is no mandate stating that these American tech companies must be manufactured in any specific sovereign country.

Silicon Valley companies are global, and American jobs lose out because of that.

This is a tough nut to crack because wages in rich Western countries dwarf the nominal amount in more affordable places.

U.S. Commerce Secretary Howard Lutnick said during an interview that the (China tariff) move was temporary.

Instead, he explained, tech products will be tariffed as part of the administration's planned duties on semiconductors, which could be announced later this week.

It's not just about timing. Companies would also need the workers to build devices.

While there's a degree of automation possible and while many of the components needed are made in the US, there's still a need for tens of thousands of trained electronics assemblers willing to work long, arduous hours in highly repetitive tasks.

Companies including Nvidia (NVDA), TSMC (TSM), Apple (AAPL), and others have announced increased investments in the US to win over Trump and avoid tariffs.

Nvidia said it will produce $500 billion in AI infrastructure in the US over the next four years through partners including Foxconn (601138.SS), TSMC, and Wistron (3231.TW).

And while that doesn't take away from the fact that the companies are pouring money into the US, it doesn't exactly support the idea that they're moving vast amounts of their manufacturing capabilities to America.

Even if companies brought their manufacturing bases to the US, they'd still have to deal with importing certain parts from abroad.

It's not just Apple that's contending with manufacturing headwinds; everything from laptop makers to display producers would face the same problems if they were to move to the US.

According to some estimates, prices on devices could double, resulting in demand destruction as consumers seek out less expensive options or hold onto their existing smartphones and computers for longer periods.

While it's unlikely manufacturing is coming back to the US, there's still plenty of uncertainty about how tech companies and consumers navigate the next four years of tariff shocks.

The biggest winners appear to be Vietnam or India, and much of the American tech manufacturing has their sights set on these places to reduce costs.

In short, this won’t destroy American tech and their shares will outperform in the long run, but in the short-term, it hurts, because it puts doubt into where they will produce their gizmos and gadgets.

At the very least, this gets American tech out of China, and I believe the federal government would be happy if businesses migrated to a more neutral country, even if they don’t come back home.

Either way, after this all blows over, there will be a great buying opportunity in American tech companies, which will all be trading at a discount.