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How Donald Trump's election as U.S. President could affect Apple

Source: Wall Street Journal

Last updated

Anticipating the full impact of the election of Donald Trump is difficult because his campaign offered little in terms of real policy proposals, instead favoring high energy crowd rallies and the drawing of media attention through the use of incredible and often shocking comments. There are some clues as to what he might make priorities in his administration however.

An empowered FBI surveillance state

While Trump's rival Hillary Clinton had worked with Silicon Valley tech leaders to draft articulated policies related to citizens' encryption rights, privacy, patent reform and education, Trump's website made no mention of any substantial ideas related to technology, innovation, privacy, intellectual property or education.

However, Trump has garnered support from operatives in the Federal Bureau of Investigations, who used their positions to influence the election by teasing the prospect of an ongoing investigation into Clinton's email use.

Last winter, when the FBI sought to force Apple to write code exploiting the security features of its own software, Apple pushed back while Trump, on the campaign trail, built a case for government interference in encryption tools. FBI director James Comey has a vast public record of desperately wanting to break encryption

FBI director James Comey has a vast public record of desperately wanting to break encryption. Trump threatened a boycott of Apple, and professed the use of a Samsung Android phone, a platform that uses ineffective encryption that's easy to exploit.

A Trump administration with a cozy relationship with surveillance-state investigators could leverage his position to attack his business rivals and anyone else he considered a threat. Trump regularly threatened to attack journalists and media outlets during his campaign, in the mold of Russia's President Vladimir Putin, a dictator who Trump has regularly praised.

Members of Congress— including prominent Republicans— have refused to empower the FBI to force companies like Apple to install security backdoors into their products. However, under the duress of an event similar to 9/11, citizens' rights to privacy could be slashed in a manner similar to the Patriot Act, legislation that Trump's running mate supported.

Jobs at risk from isolationism

Tech executives, including HP's chief executive Meg Whitman, herself a Republican candidate for California Governor in 2010, offered some bleak assessments of Trump's plans to, for example, add a 35 percent tariff on imported goods, noting that this "would sink this country into a recession. It would penalize global companies that are trying to be competitive globally."

Trump certainly gained some populist support by suggesting he would seek to induce companies like Apple to bring manufacturing jobs to the United States, as well as place caps on H-1B visas that many tech companies use to bring in skilled foreign workers.

However, Apple has already attempted to create manufacturing jobs domestically, ranging from sourcing materials for its Mac Pro from American firms to obtaining iPhone screens and certain silicon components from domestic factories. Trump's plan to add a 35 percent tariff on imported goods "would sink this country into a recession," - Meg Whitman

The problem with bringing Shenzhen-style mass manufacturing to the United States is that America lacks the vast supply chain infrastructure and specialized tool and die experts that China has cultivated for decades.

Further, American workers are largely not interested in working out of dorms in the massive manufacturing plants required to build tens of millions of devices on tight schedules to support Apple's blockbuster product launches.

Instead, Apple has focused on creating app economy jobs in the U.S., investing in efforts to build an App Store marketplace and Xcode developer tools to support entrepreneurial software creation. Apple has paid out billions of dollars to domestic developers, creating high quality employment for modern knowledge workers.

The rapid, large scale investment in the iOS App ecosystem has resulted in high paying jobs that attract talent to tech centers in San Francisco and Silicon Valley (including Facebook and Twitter), as well as spreading to other expanding tech scenes in Seattle, Portland, Los Angeles, Denver, Austin, Boston, New York, Washington DC, Dallas, Houston, Chicago, Philadelphia, Atlanta, Minneapolis, Miami and other cities around the country.

By introducing caps on visas, rapidly growing tech companies in the U.S. will find it more difficult to bring in talent acquihired elsewhere, making it more attractive for companies like Apple to simply expand their overseas operations.

Apple has already stepped up its efforts to build international development and research campuses, including facilities based in Ottawa, Canada; Cambridge, England; Herzliya, Israel; Bengaluru, India, Shanghai, China; Yokohama, Japan and many other sites.

While perfect for exciting crowds, Trump's proposed protectionist policies would interfere with America's emerging markets related to app development and new technologies ranging from virtual reality to augmented reality and self-driving vehicles, with the likely unintended consequence of moving more valuable employment overseas, keeping tax-paying visa workers employed in foreign countries where they wouldn't contribute anything to America's tax base.

New taxes on foreign earnings

International companies like Apple are required by the United States to pay domestic taxes on foreign income, but only if those earnings are brought back into the U.S. Because of this, Apple has amassed over $200 billion in foreign earnings that it has held as being "reinvested overseas."

Trump's idea to tax foreign earnings at 10 percent was falsely portrayed by a poorly written Financial Times article by Daniel Thomas and Vanessa Houlder to sound like a tax holiday. Instead, Trump's proposal would levy a tax on overseas earnings whether they were imported or not.

Such a plan would create chaos for companies like Apple, Amazon, Google, Microsoft and others that are already being targeted by the European Commission, looking for ways to grab corporate cash at the expense of those companies' investors and employees.

This would be particularly difficult if a Trump administration were also seeking to set up protectionist economic walls at the same time, potentially triggering a global recession related to economic uncertainty.

American sharia and anti-intellectualism attacking tech employees

Trump, along with his running mate Mike Pence, are climate change deniers who refuse to accept the findings of the global scientific community. Clean energy and power efficiency are not only rare economic opportunities for American business, but climate change itself is playing a major role in the increase of storm severity and in changes that are affecting existing businesses, notably agriculture.

Apple has focused resources on addressing climate-related energy issues, but if U.S. policy shifts toward attacking science rather that listening to it, it will become more difficult and expensive for domestic companies to develop and invest in the technology needed to understand and respond to climate threats as they develop. If U.S. policy shifts toward attacking science rather that listening to it, it will become more difficult and expensive for domestic companies to develop and invest in the technology needed

Rather than investing in renewable energy, Pence voted against it, as well as voting against limits on pollution.

Pence, as governor of Indiana, has instead focused on religious lawmaking, signing the "Religious Freedom Restoration Act" designed to allow discrimination against others based on their sexual orientation. Apple's chief executive Tim Cook and Salesforce's Marc Benioff both took issue with the law as bad for business, with Benioff threatening to suspend all business in the state if it continued.

Pence also voted against the Employment Non-Discrimination Act, a measure Apple supported in its efforts to support and attract diverse talent base among its suppliers and partners.

On a national level, the less well-known Pence is likely to continue promoting an agenda of marginalizing minorities on a Federal level, causing new problems for businesses trying to recruit talent and forcing competent workers to seek employment in countries where religious laws aren't a factor.

Trump rhetoric no guide to actual policy

While Trump campaigned on a variety of slogans, the reality is that nobody knows what Trump will actually do. Many of his positions have radically changed, even many times just over the course of his campaign.While Trump campaigned on a variety of slogans, the reality is that nobody knows what Trump will actually do

Trump has frequently crossed his own political party, but has also demonstrated a disinterest in actually acting as president, suggesting that he would delegate decisions to others while using the position to serve his own needs.

While portraying himself as both a conservative and as a "blue collar billionaire," Trump effectively promised to end abortion and to bring manufacturing back to the Rust Belt. But Trump has promised lots of things, and his own personal history includes no previous interest in anti-abortion politics nor in employing American workers.

That makes it virtually impossible to imagine what a thin skinned Twitter agitator, who refused to reveal any of his tax returns (keeping a secret of the parties he owes money to internationally) might do when given control over the American presidency, with the authority to command the military and appoint Supreme Court nominees.

Prior to becoming president, Trump also faces two federal trials over alleged federal racketeering related to his Trump University and allegedly defrauding consumers and the elderly, as well as a New York state investigation into his Trump Foundation.