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27.6% Tariff on Chinese Crypto Mining Rig Manufacturers Could Be a Blessing or a Curse for Miners in the USA

A trade war is underway between the United States and China, and now the biggest crypto mining rig manufacturers in the world are caught in the crossfire. Bitmain, Canaan Creative, and Ebang International are among the largest crypto mining rig manufacturers in the world and are all located in China. Crypto mining rigs have been re-classified as ‘electrical machinery apparatus’ in June 2018 after being originally classified as ‘data processing machines’, bringing them under a 27.6% United States tariff, whereas before the tariff was 0%.

These tariffs have arisen out of a growing trade war between the United States and China. On 15 June 2018, the same month mining rigs were re-classified, the United States imposed 25% tariffs on USD 50 billion of Chinese imports. China retaliated with tariffs against the United States, prompting 25% tariffs against USD 200 billion of Chinese imports, which goes into full effect on 1 January 2019 but are already at 10% as of 24 September 2018. If China retaliates again, the United States promises tariffs on an additional USD 267 billion of Chinese goods, bringing the total of Chinese imports under the new tariffs to USD 517 billion, which is essentially 100% of all Chinese imports to the United States.

It is a general rule that tariffs benefit domestic producers and the government at the expense of consumers. Indeed, crypto mining rig manufacturers in the United States will have an opportunity to capture the U.S. market, after years of being dominated by Chinese crypto rig manufacturers like Bitmain. This is where the tariffs could be a blessing since it will open up the opportunity for U.S. manufacturers to become global competitors in the crypto mining business. In general, since Bitmain has a monopoly on the global crypto mining business, it might be a good thing for U.S. crypto mining manufacturers to break that monopoly since it would increase worldwide competition and lower mining rig prices.

It will take some time for U.S. crypto mining rig manufacturers to get to the point where they can compete with Bitmain on a global scale. In the short-term, the tariffs are a curse for both the Chinese crypto mining rig manufacturers, who will lose sales, and for U.S. customers who will either choose not to buy rigs or lose most of their profits if they decide to buy rigs and pay the tariff. The crypto hash rate in the United States could decline relative to the rest of the world. Simultaneously, the loss of U.S. demand could substantially weaken Chinese crypto mining manufacturers and cause mining rig prices to increase worldwide.

This tariff curse would be lifted if U.S. mining rig manufacturers can evolve to produce rigs as cheap and efficient as Bitmain’s rigs, at which point U.S. miners will no longer be at a disadvantage, and the whole world could benefit from the global competition between Chinese and U.S. crypto mining rig manufacturers.

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