How tariffs will likely hit you in your smart home

With the global rollout of tariffs, the smart home accessories market — valued at approximately $30 billion — is entering new territory. Consumers should brace for higher prices, company closures, and even market consolidation across the sector.

The issue is the uneven nature of these additional tariff taxes on trade. While some of the big players, including Apple, might find ways to manage their way through the uncertainty, smaller vendors might not.

This realistically means they will be forced to swallow steep tariffs, and smaller vendors lack the scale to carry the burden themselves. They have little choice but to increase prices, meaning the costs of smart home accessories will inevitably go up, though the chaos may yet benefit some larger players with eyes on the space.

What happens when prices rise?

There will be several consequences.

In general, people will likely buy less. And as smart home accessories are surely seen to some extent as a luxury, that’s going to mean a sales slowdown. That’s going to drive smaller companies out of business, while larger ones will seek to combine to share IP rights, manufacturing costs and increased share. In other words, market consolidation is inevitable, which means you’ll be paying more for whatever still gets sold, and you’ll have less choice. 

This isn’t unique to smart home accessory makers, of course.

The Wall Street Journal explains that smaller electrical device makers in the tech sector are all deeply uncertain as to how they will be impacted, but many might attempt to convert customers to subscription-based services. Software is cheaper and easier to import than hardware, after all – plus, you know, personal data appears to have become the new gold in this digitally-connected age. Privacy needs fighting for, and is being lost, one unread but accepted usage agreement at a time.

Even products assembled in the US are not immune. That’s because while assembly may take place there, many of the components and rare earth elements used in them come from abroad; that means they will be liable to some tariffs.

There might be some benefits

To some extent, there may be some positives. The smart home industry has been characterized by deep fragmentation, which led to the existence of a multitude of connectivity standards, most of which have now been brought together within the all-encompassing Matter/Threads partnership.

Consolidation in the market could actually help improve consumer experiences, while the higher prices will feed higher consumer expectations, which may yet generate better customer support and product life spans. 

Hold your breath, prepare for rain

We won’t see all these things happen overnight. 

Vendors are currently working through existing inventory. But on May 2, tariffs on Chinese imports costing $800 or less will begin to be applied. Many electrical brands also have anxious manufacturing partners in China who might currently hold a large quantity of stock and will be anxious to be paid.

If they don’t get paid, that’s going to have a huge impact on trust for US brands. And given that trust is also a currency, some will leave the business when they can’t find reputable manufacturers to work with. Manufacturers talk to each other, too. 

Meanwhile, the chaos and confusion around these tariffs has also affected global shipping costs, increasing them dramatically and creating logistical problems ensuring transit is available in the fight place. Right now, everything that is being sold in your local stores was probably imported before the tariffs were declared.

What happens next

Once you put all these factors in the reality-distortion blender, it’s pretty clear you can expect the following things to happen across the lower end of the consumer technology market:

Prices will increase.

Production quality will decrease as manufacturers across the supply chain seek to cut corners.

Choice will dwindle.

You’ll be pushed toward subscriptions.

People working at these companies will lose their jobs.

New product introductions will slow.

Many companies will quit the business because they cannot carry the costs of migrating manufacturing to zones of lower tariffs.

We’ll see many of these events unfold within the coming six to 12 months.

These factors will erode consumer demand, which will reduce economic productivity.

Threats and opportunities

But there are also opportunities. Larger companies will acquire smaller competitors. The simplification of choice in the market for smart home accessories might in the end help promote product quality. Apple’s own smart home automation plans could benefit by filling the available space, even as the company takes the opportunity to build a production line, possibly in Brazil.

To some extent, this may provide consumer benefits, though devices will cost more and as vendors leave the business you can expect many existing smart home products to be left orphaned, with no software or security updates available — creating highly attractive security vulnerabilities in many homes.

If one or more of your devices fails, and your manufacturer happens to be one of those that’s gone out of business or abandoned the market, you’ll probably be left whistling Dixie rather than being realistically able to get replacement or repair. You can’t both change the game and expect things to stay as they are.

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