One of the things I enjoy at Puget Systems is that transparency is one of our core principles. We choose to pull back the curtain and show what happens behind the scenes in the computer industry. Recently, tariffs have been a big deal, impacting numerous industries—including ours. I’ve seen a lot of misinformation and misunderstandings out there. I’ve seen vendors take advantage of the FUD (fear, uncertainty, doubt) to raise prices and generate urgency for sales. This post explains the current tariff situation as we see it, its immediate impact on the pricing of our computers, and our strategic approach. This is also a fast-moving situation, so there are details that might already be out of date by the time I publish this post!

What Exactly Are Tariffs?

Let’s start there because I see misunderstandings about what a tariff is! A tariff is defined as a tax imposed by a government on imported goods. The buyer of those goods pays this tax, and because that increases the cost of the ingredients to build a product, it frequently results in a price increase of the end product to the consumer.

The US government announced this year that nearly all goods manufactured in China would face additional tariffs. The subject of this post is those tariffs on goods manufactured in China, since a significant portion of the world’s electronics production happens there. These tariffs considerably impact the computer industry. Goods from Taiwan, Vietnam, and other countries are not currently impacted.

As of today, I’m talking about a 20% total additional tariff, composed of two 10% tariffs that went into effect on Feb 4 and Mar 4. Those increases are just now working their way through costs in the computer industry.

Additionally, some items were exempted from a separate 25% tariff imposed in 2018-2019.  As of now, those exemptions are set to expire in June, which would mean the total tariff to import those goods would have increased costs 45% just this year. Those potential increases in June are concerning, but are still too far in the future to have much helpful discussion about today.

Direct and Indirect Impacts

When I think about tariff effects on the computer industry, three different types of impact come to mind:

1. Directly Impacted Goods: These products are explicitly subjected to tariffs, which directly increase their import costs and, therefore, their prices.
2. Indirectly Impacted Goods: These products aren’t taxed directly but contain components in their bill of materials (BOM) that are subject to tariffs. For example, memory modules typically use DRAM and controller chips manufactured in countries like Korea or the US, which aren’t subject to these tariffs. However, the PCB and other minor components often originate from China, causing indirect price increases. Consequently, the overall prices of these indirectly impacted goods rise, though typically to a lesser extent than directly taxed items. Another form of indirect impact is the additional overhead cost and time involved in manufacturers moving production away from China, which increases cost in the short term and can also create supply shortages during the transition.
3. Market and Inflationary Impacts: Tariffs also create broader economic effects—supply and demand shifts, market uncertainty, general overhead increases, and inflationary pressures—that drive overall costs higher, affecting even goods not directly or indirectly taxed.

The added cost to the consumer often doesn’t even stop there, unfortunately. It is not uncommon for companies to use tariffs as a reason to justify price increases beyond the true impact on their costs. To SOME extent, this is understandable because the situation introduces a LOT of uncertainty, and companies need to add some buffer as risk protection. But all too often, I see communication and price increases that I know are exaggerated. I’m not only talking about the computer hardware industry—this can happen anywhere in the supply chain, which still impacts the cost of the computer.

Tariff impacts can be particularly complicated for us due to how many layers there are in the computer supply chain. While some manufacturers absorb costs initially, others may preload anticipated price hikes. Inventory levels influence these choices. If a company has a healthy stock of an item when the tariff goes live, they are not as immediately or sharply impacted. All of these things work together to make the situation murky and difficult to predict.

Our Strategy at Puget Systems

To address these challenges, our strategy at Puget Systems includes:

• We use our inventory strategically to minimize immediate cost increases. We already have had to carry a ridiculously high amount of inventory to smooth out supply shortages, and this works in our favor… even if that is only to buy us some time for the dust to settle and for our cost impacts to be better understood. We run our company debt-free, and we use our purchasing power and cash reserves to carry even more inventory during volatile times.
• We maintain close relationships with our suppliers and ODM partners. It is always best when we can simply ask about their plans and strategies so we can work together! I’m proud to say this happens with almost all our ODM and distribution partners. The only limiters here are how quickly everything is moving and how many hours in the day we have for those conversations!
• We prioritize our attention on high-impact items. Particularly GPUs, where tariffs most significantly affect the consumer because of their high value.
• We absorb initial cost changes on many components. We adjust our pricing when ongoing long-term costs are clear, and absorb differences otherwise. This reduces noise and prevents us from making many nickel-and-dime changes.

Special Challenges During Product Launches

These tariff situations become especially challenging during major product launches, such as NVIDIA’s GeForce RTX™ 5090. When a new product is released and in high demand, supply is typically constrained, causing prices to inflate significantly. The 5090 definitely falls into that camp! I can’t remember a product in recent history that has been in such short supply for so long after launch, and the future doesn’t look much better. This scenario makes it particularly difficult to determine precisely how much of the inflated price is due to simple supply-and-demand dynamics versus the additional burden of tariffs. Unpacking exactly what’s driving costs up becomes a complicated, often unclear process during these initial launch periods.

Component-Specific Overview

Alright, let’s get to the meat of the post! Here is what we are seeing in our component supply as of today. These changes will affect our computer prices starting on April 1.

• Motherboards: We will absorb price changes to start. Motherboards and their sub-components come from various countries, and it is unclear where the ODMs will choose to adjust their pricing to mitigate (even if partially) the tariff. We’ll make changes over the coming months in specific instances if our costs change greatly. 
• CPUs: There has been no substantial impact because there is no significant supply from China. This is the best news in this post! These are typically high-cost items, so if they had gotten a cost increase, it would have had a large impact on our prices.
• SSD and Hard Drives: Approximately 10% price increase. This is more due to supply ecosystem changes in those categories, not tariffs on the high-cost BOM items (chips or platters) themselves.
• Memory: Similar to SSDs, we’re anticipating a price increase in the 10% range, but at the same time, the market price of memory has been on a downward trend. We saw price decreases come in right before tariffs, so the combined effect will be that many items will not see much net change in cost.
• GPU & Accelerators: 10% price increase. This is the worst news in this post because these components have a high cost to begin with, so even a smaller percent increase means a bigger dollar increase! They are actually impacted by a 20% tariff, but we believe the market has already built in some cost increase in anticipation of tariff changes. We’ll reassess after 2-4 weeks. Further, the tariffs here have the potential to increase from 20% to 45% on June 1, but we hope that US policy changes between now and then will dampen that increase. Brace yourself for that potential!
• Network and Storage Controllers: 20% price increase. Ouch.
• Chassis and Power Supplies: 20% price increase. Large-scale chassis production almost always comes from China, so our costs are directly impacted. We may see some price decreases from our suppliers in the future to help dampen the impact, and if so, we’ll pass that along with a price reduction at that time. 
• CPU Coolers and Fans: Approximately 20% price increase. This is not universal but is what we believe will happen on average. Thankfully these are not very expensive items in the grand scheme of things, so it won’t have a large impact on system prices, but every dollar hurts!

Any costs originating from Puget Systems ourselves (warranty, services, etc.) are receiving no change, so that also helps dampen our price change on the full computer. The only time we change those items is when our costs of running the business change—which is typically tied more to inflation and our #1 resource here—our people!

Future Changes

As you can see, this is a lot of change. Today, we maintain a database of over 600 unique parts to build our computers. Shout out to our supply chain and website teams for the countless hours that have gone into this so far, with just as much effort needed for the foreseeable future! We will reassess this round of changes in a few weeks and make further honing adjustments anywhere we find our understanding to be inaccurate.

As it stands now, the next round of tariff changes are expected to take effect on June 1, when many categories of products could increase from 20% to 45%. This one really concerns me! But a lot can change between now and then, so we’ll take things as they come.

Working Together

We’re doing all we can to mitigate the effect of these immediate tariffs, as well as the possible increases on June 1. There are practical ways we can work together with you, our customers:

• Forecasting: When we work together to forecast your needs, we can secure inventory and plan ahead on other supply chain impacts. We don’t need a commitment to stock up on our inventory—any information helps us make decisions!
• Early Purchasing: Consider making planned purchases before June 1 to avoid higher costs due to tariff increases. I don’t like giving a “buy now” message, but it is legitimate that the anticipated changes on June 1 are unclear and potentially large.
• Budget Planning: Include potential tariff impacts in your proposals and budgets now, so there are no surprises if prices increase before your purchases happen later in the year.

If you can think of other ways we can work together on this, feel free to post in the comments section below. I’ll keep the transparency coming!