Will telecom be priced out with Trump’s tariffs?

•  Vendor supply chains could feel the burn from newly implemented tariffs
• There’s still uncertainty on whether the tariffs will last and which products will be affected
• Sustained tariffs may stunt the U.S. economy along with tech innovation, said AvidThink’s Roy Chua

President Donald Trump is less than a month into his second term but has wasted no time imposing a10% tariff on goods from China, sparking concern from the telecom industry. Equipment vendors are understandably keeping a close eye on how events unfold, because while wireline providers may be left unscathed the same can’t be said for the supply chain.

Will Townsend, VP and principal analyst at Moor Insights & Strategy, told Fierce the China tariff is a “non-impact” for rural U.S. broadband deployments, given providers have been “well on the way” of reducing equipment from vendors like Huawei and ZTE. IDC analyst Jitesh Bhayani similarly said he doesn’t anticipate “an immediate impact from a service providers perspective.”

That’s mainly due to the government’s Rip and Replace program, which is poised to get $3 billion in additional funding from Congress. And in the past few years, fiber vendors have also been onshoring their manufacturing to the U.S. due to Build America, Buy America (BABA) Act requirements associated with the $42.5 billion Broadband Equity, Access and Deployment program.

But the White House also wants to implement a 25% tariff on imports from Canada and Mexico (with each country also threatening its own retaliatory tariffs), but agreed last week to a 30-day pause. If those do move forward, “I believe it could impact fiber and wireline infrastructure with supply chains in those countries,” Townsend said.

As AvidThink Principal Roy Chua noted, “While tariffs might incentivize hardware tech vendors to onshore more activities longer term – including semiconductor fabrication – supply chain retooling takes a while.” 

“Even less sophisticated chains take at least 6-12 months to shift,” he added.

Things are a little less dire for telecom software vendors, with Chua tipping tariffs to have a “limited” immediate impact in this area.

Vendors are on guard

Considering all the uncertainty around whether the tariffs will hold, and the impact retaliatory tariffs may have, “it’s hard for vendors to lock in capex commitments for onshoring,” Chua noted.

There are tons of moving parts vendors have to consider, according to Dell’Oro Group VP Analyst Jimmy Yu. Manufacturing, assembling and testing goods is “one of the most complex processes” a company can undertake.

“This often requires piece parts, subassemblies, and finished products that may originate in the U.S. to be shipped to other parts of the world before making their way back to a customer in the U.S.,” Yu explained.

Not only may tariffs apply to some goods and not others, they might “be based on the percent of product manufactured in the country or another metric,” he said.

Indeed, telco vendors are waiting to see how the tables will turn. Nokia told Fierce its “recent preparations for BEAD eligibility” along with the Infinera acquisition has “strengthen[ed] our ability to adjust our supply chain as appropriate.”

“Nokia maintains a flexible global manufacturing footprint, allowing us to adapt as needed to evolving trade policies,” said a spokesperson.

Ciena, though it is headquartered in the U.S., “has manufacturing and sourcing operations in several countries,” a vendor rep said. That helps the company “manage risks tied to any single location.”

HPE is also “closely monitoring” developments on the tariff front, said company spokesperson Adam Bauer. Though tariffs do pose challenges such as “pricing dynamics,” he said HPE is “well positioned to take actions, such as shifting some sourcing and production, to help mitigate the impacts.”

Bad news for the economy regardless

The tariff landscape itself is also rapidly evolving. Trump on Monday imposed a 25% tariff on all steel and aluminum imports – a move that stands to impact manufacturers of construction equipment, appliances and more.

Sustained tariffs “likely pose a dual threat to U.S. competitiveness,” Chua said. They’ll increase supply chain costs and potentially isolate domestic companies from “global innovation networks.”

“The key concern isn’t just immediate price increases, but rather the risk of diminished innovation and global market position if protectionist policies create technological isolation,” he concluded.