Trump admin tariffs will slow US cloud market, stifle innovation, says ITIF

Proposed import taxes could stymie development of cloud tech, put the U.S. at a competitive disadvantage and adversely impact consumers – and, potentially, patients, a new Information Technology and Innovation Foundation study shows.
By Mike Miliard
01:38 PM
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The tariffs being proposed by the administration of President Donald Trump, particularly those on certain Chinese imports, could harm the booming cloud computing industry in the United States, undermine U.S. leadership in the sector, and harm innovation – not least in healthcare.

That's according to a new report from the Information Technology and Innovation Foundation, the influential nonprofit tech policy think tank, based in Washington, D.C.

By stifling the development of fast-evolving cloud technology, the tariffs could put the U.S. at a competitive disadvantage and adversely impact consumers – and, potentially patients, according to the study, which spotlights some specific initiatives that could be affected by import taxes.

"For businesses large and small alike, in industries ranging from agriculture and manufacturing to healthcare and transportation, cloud computing has become an indispensable platform technology critical to their success," ITIF researchers wrote in the report.

The U.S. economy has become utterly dependent on cloud computing, with 93 percent of businesses nationwide – including most hospitals and health systems – relying on some 3 million data centers, the study showed.

And, of course, innovation in the cloud space is enabling huge advances in technology offerings and healthcare outcomes.

But Trump's desired tariffs on Chinese imports would put a crimp in the pipeline of key components that fuel that innovation, and could have four specific negative consequences for the industry, the study argues:

  • Higher prices for business and consumers using cloud technology;
  • Fewer new hires, less R&D for product innovation and slowing business expansion as cloud providers seek to cut costs;
  • Higher costs to provide cloud services from the U.S. could leader to other international locations more price-competitive;
  • Disruption of global supply chains for the manufacture of IT – something that "wouldn’t be easily reinvented in the short-term without significant detriment and dislocation to U.S industry."

As the report's lead author, Stephen Ezell, ITIF's vice president for global innovation policy, explained: "While the tariffs were proposed to counteract unfair Chinese trade practices and improve U.S. competitiveness, they in fact hurt U.S. cloud computing competitiveness. It’s critically important to contest Chinese innovation mercantilism, but the administration’s proposed tariffs on key capital goods imports are the wrong way to go about it. They threaten U.S. leadership in cloud computing and stunt U.S. economic growth."

To help make its point, the ITIF study pointed as an example to San Francisco-based Numerate, which has a healthcare focus, and is using cloud-powered analytics to help improve the drug-design and innovate precision medicine approaches for cardiology.

"Numerate’s algorithms provide predictive models for molecular properties with accuracies comparable to laboratory testing, enabling scientists to search through billions of compounds to rapidly and efficiently identify those with the highest probability of activity against a specific  disease target," according to the report.

The company's uses cloud computing to help it harness "exploding amounts of empirical data to clear the way for scientists to design new therapies in the cloud," leading to new approaches that could "dramatically reduce the cost of pharmaceutical development and expand the number of therapies that can be created and tested by moving medical research away  from a 'hit-and-hope' world of trial-and-error guesswork."

But new tariffs could slow that work, ITIF maintained – and work similar to it at life sciences companies, health IT vendors, hospitals and health systems.

"Many Americans will feel the impacts of the proposed tariffs on cloud computing through increased prices, lost jobs, and decreased economic opportunity," said the report's co-author Caleb Foote, ITIF research assistant. "The administration should pursue alternative policy measures that don’t raise the cost of key productivity- and innovation-enhancing capital goods and services."

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Twitter: @MikeMiliardHITN
Email the writer: mike.miliard@himssmedia.com