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Apple temporarily escapes new tariffs in escalating US-China trade war

Last updated

U.S. President Donald Trump made good on a trade war deadline on Friday, increasing tariffs on some Chinese imports. While Apple products have so far evaded impact, that may be short-lived.

Goods already under a 10 percent tariff are now subject to 25 percent, according to BBC News. Trump indicated that work is in motion, however, to slap a 25 percent tariff on another $325 billion in Chinese goods, which could harm Apple profits given that most its products are assembled in China by firms like Foxconn and Pegatron.

Talks between the two countries took a turn for the worse recently after the U.S. accused China of backtracking on key points. China has promised to enact "necessary countermeasures" to retaliate for U.S. tariffs, though it is continuing to negotiate.

Apple could theoretically move manufacturing into countries like India and Vietnam — Indian iPhone manufacturing is expanding — but the company has strict quality and capacity needs, so there would inevitably be a period of delay in which tariffs would bite. Many of its parts suppliers also operate out of China.

The company is already in a delicate position. While services revenue is growing, they aren't growing fast enough yet to counter falling iPhone sales. Sales of the iPhone have been down year-over-year for two consecutive quarters, and Apple is employing trade-in promotions and regional price cuts to keep them afloat.

Apple may be more likely to absorb any hit, since it can fall back on its $225.4 billion in cash reserves if all else fails.