President Trump’s trade tariffs will likely cause a major dint in the profitability of Chinese companies producing cryptocurrency mining hardware.
Of the three mining giants based in China, Beijing’s infamous Bitmain is expected to be the worst hit since they rely most heavily on overseas sales.
As Trump’s Trade War Heats Up, US to Charge Chinese Mining Manufacturers 27.6% Tax
Three of the planet’s largest producers of mining hardware are expected to be negatively impacted by the trade tariffs introduced by President Trump in late August.
Bitmain, Canaan, and Ebang International will be forced to pay a whopping 27.6 percent on all units sold in the U.S. This is because the U.S. Trade Representative categorised mining hardware as “electrical machinery apparatus” in June.
Ben Gagnon, the co-founder of Bitcoin mining equipment development firm LuTech, told the South China Morning Post about how the tariffs would likely impact the largely Chinese led industry:
“All manufacturers of mining rigs based in China will likely be affected by the tariff code change and, in turn, captured by the U.S. trade tariff.”
Of the industry’s three largest companies, Beijing-based Bitmain is expected to be worst hit by the trade tariffs. This is because the firm’s overseas sales made up a massive 51 percent of its total revenue in the years 2016 and 2017. These figures come courtesy of Bitmain’s own initial public offering prospectus.
Meanwhile, Canaan and Ebang International do not rely as heavily on exports with their own overseas sales contributing just 8.5 percent and 3.8 percent respectively during last year.
However, the precise percentage of sales destined for the U.S. from any of the three companies is unclear.
One of Sanford C. Bernstein’s senior analysts, Mark Li, states that the U.S. trade tariffs against China will make the units created by Bitmain, Ebang International, and Canaan much less attractive for cryptocurrency miners operating in the U.S. This would allow products from other countries to erode the influence China currently exerts on the mining industry.
For Bitmain, the Chinese trade tariff is not the only factor threatening to dethrone them as the planet’s largest cryptocurrency mining hardware manufacturer.
Their dominance in the race to create the most technologically advanced chips is quickly dwindling with offerings from the likes of GMO and Canaan being more efficient and faster than Bitmain’s flagship model.
Additionally, the Chinese cryptocurrency mining giant is also thought to be holding huge reserves of Bitcoin Cash on their books. The figure is thought to be so large that there is no practical way for the company to offload them without crashing the market.
Li summarised that Bitmain’s situation is looking increasingly bleak. So much so that the company probably have bigger issues to worry about than Trump’s harsh trade tariffs:
“The U.S. tariff is probably not something on the top of the management’s minds now.”
Featured image from Shutterstock.
The post Trump’s Trade Tariffs on Chinese Imports to Hit Mining Manufacturers Hard appeared first on NewsBTC.