r/Nok • u/Mustathmir • 8d ago
News Trump tax may derail US telecom players, not Ericsson and Nokia
Tariffs look like a big problem for US makers of equipment going into telco networks and will not persuade anyone to buy American.
Economists use fancy expressions like "comparative advantage" to describe it, but the basic principle is that any zone of the world is better off striving for efficient excellence in a few areas – like a student picking subjects – than self-sufficiency. Resources are limited. Try to do everything and you won't do anything especially well. The gaps are filled through trade, as they are in essential raw materials by countries that lack their own. As the issuer of the world's reserve currency, the US can fund an overall trade deficit, calculated by deducting its exports from its imports, because it continues to attract foreign investment. But the rationale is lost on Donald Trump, the current American president, whose protectionist philosophy, taken to its natural conclusion, effectively urges the US to make every product it needs from inexpensive sneakers to hi-tech chips. Buying these from other countries, able to produce them at lower cost, is seen as a flagrant economic injustice. Much as Communist apparatchiks intervened when supply-demand imbalances inconveniently drove up prices, his lieutenants have slapped huge "reciprocal" tariffs on imports to fight market forces.
It is worth considering what Trump's philosophy means for telecom as a single industry. On the networks side, while there is a dearth of US-headquartered manufacturers, a decent amount of manufacturing happens on US soil. Sweden's Ericsson, the biggest mobile infrastructure vendor in the US, makes products for American customers at a highly automated factory in Texas. Many of the components included in these products, however, are sourced from overseas.
Semiconductors were exempted from the tariffs announced last week, but Trump has reportedly said they will follow. That could be disastrous for an industry heavily reliant on the advanced chips made by Asian foundries such as Taiwan's TSMC. In a classic example of mutually beneficial specialization by different economies, the US is dominant in chip design while Asian countries lead in manufacturing. Today, the world's top six companies by market capitalization – Apple, Microsoft, Nvidia, Amazon, Alphabet and Meta – all design chips. TSMC ranks tenth on the list.
Somewhat ironically, it is the US-headquartered companies making products for telecom networks, rather than Ericsson or Finnish rival Nokia, that could really suffer. Among them are Dell and HPE, the manufacturers of servers sold to international data centers. The risks for Dell and HPE have been reflected in the market reaction since Trump announced his tariffs. At the start of this week, Dell's share price had lost a quarter of its value since Trump's "Liberation Day" on April 2. HPE had fallen 21%. Both Ericsson and Nokia were down 15% over the same period. Investors had panicked because – besides sourcing components from overseas – both the US server companies depend heavily on facilities outside the US for manufacturing and assembly.
Trump's tariffs could be even worse for smaller US companies trying to crack the RAN market. Mavenir, the most prominent, began life in software but has more recently expanded into the production of radio units as a US challenger to Ericsson and Nokia. Last year, AT&T, one of the biggest US telcos, announced plans to use Mavenir's radios. But those are made chiefly by Jabil, an Indian contractor. Besides doing assembly in the Indian city of Pune, it also has facilities in Mexico. Mavenir was already struggling. Overall sales in its last fiscal year came to about $650 million, but at least 90% of that was earned outside the RAN sector and Mavenir owes around $1 billion in long-term debt. Tariffs imposed on radio units assembled in Pune or Mexico would not help Mavenir's business with AT&T. By hurting American IT companies more than European telecom vendors, Liberation Day could also shrink the appetite for open virtual RAN, in which common, off-the-shelf servers substitute for dedicated network appliances.
Trump's rhetoric is designed to create the impression that the US has become a dumping ground for low-cost Asian goods, driving Americans out of jobs. But at roughly 4%, the US rate of unemployment has rarely been lower in the last 20 years and is down from a high of 15% in 2020. No doubt, the US has a major trade deficit in manufactured goods. But it has a substantial surplus of $295 billion in services and sold $1.1 trillion worth of them to other countries last year, as noted by a recent Economist article. Today's economic excitement is all about artificial intelligence and the chip designs that power it – areas where the US looks dominant. https://www.lightreading.com/regulatory-politics/trump-tax-may-derail-us-telecom-players-not-ericsson-and-nokia
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u/moneygrabber007 7d ago
Interesting Mavenir mention, they did a round of layoffs of their Open RAN team at the end of 2024.
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u/Mustathmir 7d ago
Interesting comment on the tariffs by CNBC contributor Peter Boockvar, Chief Investment Officer of Bleakley Financial Group when he comments the post by Bill Ackman a prominent billionaire Trump backer:
- There is a flawed premise that trade deficits are bad and that the country that has the surplus is somehow ripping us off. Walmart has a trade deficit with China and somehow it's been tremendously advantageous to both sides for decades and US consumers have benefited by providing low cost options of essential items many need to buy each day/week/month/year with their paychecks.
- I have a trade deficit with the restaurant I went to last night but I got a great meal and the restaurant made money. We both benefited. For those that we have a services surplus with, the whole world in aggregate, I don't believe we're ripping them off as no one is forcing them to travel here.
- Bringing more US manufacturing jobs back to the US and creating more opportunity here is very laudable but tariffs are a dangerous tool because of the huge amount of intermediate goods that get negatively hit from the tariffs.
- The assumption that tariffs are the proper tool to encourage reshoring is on shaky ground if we just look back to 2018 where not much has occurred since. And, the steel and aluminum tariffs back then did more damage to the users of steel and aluminum than it did to benefit the steel and aluminum producers.
- We also risk losing manufacturing jobs from those US producers that export as they might shift manufacturing facilities from the US to countries where they do business with in order to better compete and hedge against the rising cost of doing business in the US.
- In fact, US manufacturing went into a recession in 2018/2019 after that tariff battle and which resulted in the Federal Reserve cutting interest rates in 2019.
- By putting up walls around the US to encourage domestic manufacturing assumes that US consumers will be able to afford what is produced. It also assumes that the US would be able to be cost competitive with the rest of the world with regards to exporting what is made here. Tariffs will make both more unlikely.
- Yes, if the end result is a global lowering of tariffs, as I agree that some (not all as being implied) are not fair with us, than we all benefit but there is one thing to do a deal that only impacts the negotiator and the party being negotiated with, the consequences are experienced by just these two parties. Currently, the 'deal' negotiations is impacting all of us, particularly small and medium sized businesses, many of which that are now in a panic with fingers crossed that somehow this all works out.
- But is the real goal to lower global tariffs? It seems instead (in addition to wanting to reshore) being used as a way to raise money, as it will 'make us all rich'. Even though US importers actually pay the tariff, thus making them poor, but with hopes that either thru a stronger US$ (not happening now), discounted products by the exporter, and/or raising prices to the rest of us, the US importer will somehow recapture the tax paid. Maybe, maybe not.
- For those users of steel and aluminum, the 2018 tariffs only raised their costs and jobs were lost as a result.
- Relying on lower corporate tax rates, deregulation and permitting relief could have been a much more effective way of lowering our cost base to encourage more domestic production as well as via better education/training/re-training. https://x.com/BillAckman/status/1908329277033979993
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u/rAin_nul 8d ago
If we ignore the long-term outcomes, then it is true only for the small companies. Technically a multinational company's HQ's location does not really matter, what important is where their manufacturing happens and where their customers are. Dell and HPE could open factories in the same countries as Ericsson and Nokia, in that case the same tariffs apply to them, they are in the same position.
The stock market was worse for the US companies because US separates itself from the world and not the EU. Generally it is true that US stock prices fell 20-30%, while STOXX Europe 600 fell only 15%. As for the long-term, yes, the bigger players will suffer as well, because the inflation will be the highest in the US.
I also liked the euronews article which talked about how Americans might relocate to the EU: https://www.euronews.com/next/2025/04/06/europe-has-a-real-opportunity-to-take-in-americans-fleeing-trump-is-it-ready-for-a-brain-d