Miners play chicken with Trump tariffs

Economic protectionism was a keystone of President Trump’s campaign, with tariffs providing the foundation of this policy. With Trump’s second term fast approaching, Bitcoin mining companies are preparing for the new round of tariffs – and bracing for how they could affect business. 

In his first term, Trump (in)famously (depending on who you ask) levied a series of tariffs on consumer and industrial goods from China to the tune of 10-25% depending on the import, a policy that the Biden administration kept in place. Now, President Trump is planning to impose an additional 10% tariff on Chinese goods, as well as 25% tariffs on all goods imported from Canada and Mexico, according to the Associated Press.

Beginning in 2018, Trump’s first round of tariffs substantively impacted bitcoin miners, both by way of imports on ASIC miners as well as infrastructure like containers, transformers, and the like. Bitcoin mining companies are making ready for Trump Tariffs 2.0, but it’s still uncertain if the new policy proposals are mere swaggering negotiating tactics or legitimate threats. 

If they’re not, though, many mining companies will need to adapt to the elevated tax on Chinese imports. 

With threat of new tariffs looming, ASIC manufacturers eye U.S.-based manufacturing

Trump’s first round of tariffs jacked up the price of ASIC miner imports to the US, as Bitmain and MicroBT still assembled the bulk of these machines in China. In fact, in the immediate aftermath of the ban, ASIC units sold in the U.S. carried a premium to those in China for a combination of shipping and tariff costs. 

But the China Mining Ban changed this. 

Following the ban, Bitmain and MicroBT started offshoring their manufacturing, although substantial assembly volumes still take place in China for both companies. Now, Bitmain assembles a good deal of its Antminers in Malaysia, but it also has a small foothold in Thailand and Indonesia. MicroBT assembles a smattering of its hardware in the U.S., but this share is tiny compared to its Chinese facilities. Of course, not all ASICs manufactured by these companies end up in the United States, either.

The threat of increased tariffs, though, is pressing these companies to look elsewhere for manufacturing capacity. One source, who asked to remain anonymous, told Blockspace that “all the major manufacturers have been seeking U.S. production plants.” Another source, who also spoke on the condition of anonymity, said that Bitmain is looking at a handful of other countries for new plants. 

One of these sources continued to say that the new round of tariffs won’t necessarily affect ASIC prices in the U.S. as long as the major manufacturers can scale production outside of China. Additionally, they surmised that Trump’s tariffs could eventually reach into other Asian jurisdictions beyond China, something that the manufacturers may be likewise anticipating as they look for factory space in the United States. 

The precautionary step is understandable given Trump’s chest beating about restoring America’s immiserated manufacturing base, but his incoming administration so far hasn’t signalled that the tariffs will extend beyond China, Canada, and Mexico. On that point, another source speaking anonymously said that they are adopting a wait-and-see attitude toward the tariffs, adding that it remains to be seen whether they are “legit or puffery.”

This last point bears repeating. For instance, Trump’s incoming Commerce Secretary, Cantor Fitzgerald CEO Howard Lutnick, has claimed that Trump will use these tariffs as a “bargaining chip,” implying that they will be used as a negotiating tactic for global trade and not materialize. 

Collateral damage

Teeth or no teeth, industry participants are taking precautions, treating the tariffs as if they will be a reality on day one. 

Another company, whose representatives asked to remain anonymous, said that they are thinking strategically about the tariffs and putting contingencies in place should they come to pass. 

Beyond ASICs, the tariffs could impact the importation of critical bitcoin mining infrastructure like transformers, electrical equipment, and containers. Many of these goods are already under the yolk of Trump’s first slew of tariffs, and another 10% hike could increase the burden even further to the point of making the imports uneconomical. 

Perhaps the end result of Trump’s increased tariffs could mean that more links in the Bitcoin mining supply chain migrate to the United States, further entrenching it as the international epicenter of the industry. Bitmain and MicroBT’s efforts to establish manufacturing bases in the United States is certainly a lodestar to this effect. But there’s no guarantee that companies will begin sourcing equipment from the United States; they could look elsewhere, like India, for cheap transformers, but containers, from which China provides 85% of the world’s supply, will be more difficult to source.

At any rate, the threat of renewed tariffs is causing industry professionals to adjust their strategy, and we’ll know soon enough whether these precautions are merited.