US and China Reach 90-Day Tariff Delay Agreement: AI Supply Chain to Benefit, PC and Panel Industries Continue to Face Challenges

Taiwan • Business • 05/13 10:59
US and China Reach 90-Day Tariff Delay Agreement: AI Supply Chain to Benefit, PC and Panel Industries Continue to Face Challenges

On May 12, 2025, the United States and China reached an agreement to temporarily suspend additional tariffs for 90 days and significantly lower punitive tariffs. Andy Ai, head of Taiwan Research at UBS Investment Bank, pointed out that this positively impacts market sentiment, especially in the AI supply chain. However, industries like PCs and panels are still affected by exchange rate fluctuations, advance stockpiling, and low profit margins. The agreement involves the U.S. cutting tariffs from 145% to 30% and China reducing theirs from 125% to 10%.

Key Updates

05/14 02:25

Inflation pressure in the U.S. is easing, but the impact of tariffs has not yet been observed. Forecasters are warning of potential price increases in May or June.

April inflation data in the U.S. indicates that the annual growth rate has dropped to 2.3%, marking a four-year low, which is below expectations. However, economists believe that the Trump administration's high tariff policies have not yet been fully reflected in prices, due to companies stockpiling inventories and the lagging effects of tariffs. The impact is expected to become evident in May or June. Federal Reserve officials remain cautiously watchful of future price trends, and the market is closely monitoring upcoming data to assess the impact of tariffs.

05/14 01:54

CNBC commentator Jim Cramer breaks down the effects of Trump's temporary tariff delay policy on the market's rebound.

Former President of the United States, Donald Trump, announced a temporary suspension of new tariff measures on China and other trade partners, which led to a market rebound. CNBC commentator Jim Cramer analyzed this policy reversal, pointing out that tech stocks benefited and market expectations were disrupted. Cramer described it as a "game of chicken without any winners," posing risks for short-term traders and highlighting the subtle interaction between policy and the market. This move might be intended to avoid an economic slowdown caused by tariffs, which could impact the Federal Reserve's ability to lower interest rates. The tariff pressure on businesses has been temporarily eased, and limited market supply and strong earnings reports also contributed to the stock market rebound.

05/14 01:54

U.S. inflation dropped to 2.3% in April, easing concerns over stagflation and leading to expectations of interest rate cuts.

According to data released by the U.S. Department of Labor on May 13, 2025, the annual CPI increase rate for April dropped to 2.3%, the lowest level since February 2021, which was below the expected 2.4%. The core CPI annual increase rate stayed at 2.8%, meeting expectations. This data shows that inflation has been slowing for three consecutive months, raising market expectations for a Federal Reserve interest rate cut, temporarily easing the risk of stagflation. However, uncertainty surrounding tariff policies could still impact future inflation trends.

05/13 15:24

China-US Reach 90-Day Tax Reduction Agreement: Toy Industry Benefits, Trump's New Drug Pricing Policy Gains Attention

On May 12, 2025, the US and China reached a 90-day "tariff reduction agreement" in Geneva, where US tariffs on Chinese goods were reduced from 145% to 30%, and Chinese tariffs on US goods were reduced from 125% to 10%. This agreement temporarily halts the trade war and is beneficial to the US toy industry, though the risk of price fluctuations still exists. On the same day, Trump signed an executive order to promote the "most favored nation pricing" policy for pharmaceuticals, mandating that pharmaceutical companies reduce US drug prices to align with those in other developed nations, which drew significant attention from the pharmaceutical industry.

05/13 10:59

The United States has reduced the tariff on small packages from China to 54%, ended the de minimis tax exemption policy, and maintained a fixed fee of $100 per package.

On May 13, 2025, the White House announced that starting May 14, the tariff on small parcels valued at no more than $800 sent from mainland China and Hong Kong to the United States will be reduced from 120% to 54%. However, a fixed fee of $100 per parcel will still apply, and the planned increase to $200 per parcel in June has been canceled. This move ends the small parcel exemption policy that has been in place since 1938, aiming to tackle the misuse of the system for smuggling and dumping.

05/13 10:59

US and China Reach 90-Day Tariff Delay Agreement: AI Supply Chain to Benefit, PC and Panel Industries Continue to Face Challenges

On May 12, 2025, the United States and China reached an agreement to temporarily suspend additional tariffs for 90 days and significantly lower punitive tariffs. Andy Ai, head of Taiwan Research at UBS Investment Bank, pointed out that this positively impacts market sentiment, especially in the AI supply chain. However, industries like PCs and panels are still affected by exchange rate fluctuations, advance stockpiling, and low profit margins. The agreement involves the U.S. cutting tariffs from 145% to 30% and China reducing theirs from 125% to 10%.

05/13 10:26

The temporary reduction of tariffs between the US and China has boosted exports, resulting in an 88.88% increase in Wan Hai Lines' profit in the first quarter of 2025 and the expansion of its routes.

On May 13, 2025, the US and China reached a 90-day tariff agreement in Geneva, reducing US tariffs on imports from China to 30% and Chinese tariffs on imports from the US to 10%. This move offers a short-term boost for Chinese exporters. Wan Hai Shipping announced its financial report for the first quarter of 2025, with net profit after tax increased by 88.88% compared to the previous year, and freight rates on Asian routes increased by over 30%. In response to growing demand for cargo space, Wan Hai is expanding its shipping routes and initiating new shipbuilding plans to boost capacity and competitiveness.

05/13 08:57

90-Day U.S. Tariff Suspension Triggers Buying Frenzy: Experts Advise Stockpiling Five Key Categories of Imported Foods

In early May 2025, the U.S. government announced a 90-day suspension of tariffs on imports from multiple countries, serving as a buffer period for negotiations with trade partners. This move sparked a buying frenzy in major cities across the U.S., as consumers feared price hikes once the tariff period ended, leading them to stockpile food and daily necessities. Experts recommended stockpiling grains, coffee, wine, cheese, and cooking oil, since these goods are highly dependent on imports and face significant tariff increases. The market reacted cautiously, with businesses taking a wait-and-see approach during the suspension period, while some accelerated shipments to reduce future tax risks.

05/13 06:59

Due to the new US tariff policy, Samsung is increasing DRAM prices: DDR4 by 20% and DDR5 by 5%. Companies are stocking up in advance, boosting demand.

In May 2025, Samsung Electronics agreed with major clients to raise DRAM prices due to new upcoming US tariff policies, with DDR4 increasing by 20% and DDR5 by 5%. This move was driven by companies stocking up in advance, which increased demand. SK Hynix and Micron also adjusted their prices simultaneously, indicating supply chain and policy pressures in the DRAM market. These adjustments reflect changes in market demand and suppliers' strategic responses.

05/12 21:54

Customs duty revenue in the United States reached a record high of $16 billion in April 2025, easing the pressure on the budget deficit.

In April 2025, the U.S. federal government's customs revenue reached $16 billion, a 130% increase from the same period last year, setting a new monthly high for the past decade. This growth was primarily driven by the Trump administration's 'across-the-board 10% tariff' and significant punitive tariffs on China. This revenue boosted the April budget surplus to $258.4 billion, a 23% increase from the previous year, partially easing the budget deficit pressure.

Summary of the US-China Tariff Agreement

According to the agreement, the US will reduce tariffs on Chinese exports from a maximum of 145% to 30%, which includes a 20% tariff on fentanyl-related products and a 10% base rate. China will lower tariffs on US goods from 125% to 10%. This temporary measure will last for 90 days, expected to conclude by mid-August 2025, during which both parties will continue negotiations. Although the tariff policy remains unchanged before 2025, this agreement symbolizes a gesture of reconciliation in trade policy between the two sides.

UBS noted that this tariff reduction covers about 35% of hardware shipments and 50% of hardware revenue, providing a significant boost to market sentiment. In 2024, China's total exports to the US are approximately $439 billion, with over $130 billion being technology products, including smartphones, PCs, TVs, gaming consoles, and low-end networking equipment.

AI Supply Chain: A Relatively Stable Sector

UBS believes that the AI supply chain is relatively stable amid this tariff adjustment. Alan D. noted that most AI-related hardware and semiconductor products have been temporarily exempted from tariffs, with about 80% of tech products currently unaffected by new tariffs. This gives the AI supply chain higher resilience in the face of trade policy fluctuations.

Additionally, UBS expects that the better-than-expected tariff outcome will somewhat expand tech stock portfolios, especially for companies related to AI hardware deployment. The industry dynamics in the coming months will be further explored at the upcoming Computex and UBS Asia Investment Forum, where more specific information on AI hardware deployment progress will be available.

PC and Panel Industry: Facing Multiple Pressures

Compared to the stable performance of the AI supply chain, UBS holds a conservative view on industries such as PCs, fabless display, panels, notebook ODMs, and second-tier fabs. Alan D. noted that these industries generally face the following challenges:

  • Exchange rate fluctuations: Changes in the exchange rate between the New Taiwan Dollar and the US Dollar negatively impact export-oriented companies.
  • Advance stocking demand: To cope with potential tariff risks, some companies have advance stocking, which may lead to subsequent demand weakness.
  • Low profit margins: The gross margins of the aforementioned industries are generally low, making it challenging to absorb the pressure from rising costs effectively.

Moreover, although China currently accounts for about 74% of global notebook production, the continued impact of the 20% fentanyl tariff may suppress PC shipments and accelerate the shift of the supply chain to Southeast Asia.

Uncertainty in Apple's Supply Chain and Section 232 Investigation

UBS also noted that Apple's supply chain still faces potential volatility risks, especially since the results of the US Section 232 investigation on semiconductors and tech products have not yet been released. If a 25% tariff is imposed on final tech products (excluding parts originating from the US) in the future, it may further suppress end demand, putting pressure on the overall tech industry.

Currently, the suspension of reciprocal tariffs and Chinese tariffs remains closely tied to negotiation progress, and future policy directions remain uncertain. UBS reminds that although market sentiment has temporarily eased, medium- to long-term attention is still needed on the substantial impact of policy changes on the supply chain.

Industry Observations and Future Focus

According to UBS's observations, the smartphone market has already reflected the worst-case scenario, with some companies' stock prices and shipments already reflecting potential risks. In contrast, the stable performance and policy exemptions of the AI supply chain make it a relatively attractive sector in the current tech industry.

The upcoming focus for industry observation will be the Computex exhibition next week and the subsequent UBS Asia Investment Forum. These two events are expected to reveal the latest progress in AI hardware deployment and provide more empirical data on supply chain adjustments and industry dynamics.

References

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