Anthony Pompliano believes the current trade dispute between the United States and China could have a significant impact on the former’s Bitcoin mining scene. The Morgan Creek Digital chief predicts mining equipment sales in the U.S. could decline due to new tariffs imposed by the Trump administration.
Tariff Hike to Affect Bitcoin Mining Equipment
In a note published on Thursday (October 18, 2018), Pompliano referenced the recent increase in the tariffs imposed on electrical goods from China. According to the South China Morning Post, the U.S. government, in June 2018, changed the classification of Bitcoin mining hardware from “data processing machine” to “electrical machinery apparatus.”
Based on this new reclassification, BTC mining rigs became subject to a 2.6 percent tariff. The story, however, does not end there. This new classification means BTC miners are now subject to an additional 25 percent tariff slapped on select Chinese products. Thus, the total duty on mining equipment now stands at a whopping 27.6 percent.
Likely Decline in U.S. Mining Rig Purchases
Commenting on the new development, Pompliano said:
Companies like Bitmain and Canaan are likely to see a noticeable decline in mining rig purchases from the U.S.
Echoing similar sentiments, Ben Gagnon of LuTech – a BTC mining hardware firm – said:
All manufacturers of mining rigs based in China will likely be affected by the tariff code change and, in turn, captured by the US trade tariff.
According to its recently published IPO prospectus, Bitmain, the world’s largest Bitcoin mining hardware manufacturer, has more than 50 percent of its annual revenue coming from overseas sales.
The U.S. Risks Falling Behind the Curve
As with the state of regulations in the U.S., the decision to hike tariffs on BTC miners could see the country fall further behind in emerging cryptocurrency industry. Speaking about the possible implications, Pompliano said:
The cost of mining hardware is one of the two largest input costs in the mining business, so a 27.6% tariff will have a significant impact on the economics of each miner’s business.
Miners tend to move to places where the operating conditions favor their business. Hence, it is not uncommon to see an influx of such companies into areas with cheap electricity. Higher import tariffs on hardware don’t tick the box of convenience as far as economics is concerned for miners. Hence, mining firms could begin to move their business away from the country.
Do you think the U.S.-China trade war will lead to declining Bitcoin miner sales in the former country? Let us know your thoughts in the comment section below.
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