Roger Fingas
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.
Amber Neely
Andrew Orr
William Gallagher
Christine McKee
AppleInsider Staff
Chip Loder
29 Comments
It's not much of a war. The tariffs haven't worked and raising them again isn't going to change that. The U.S. withdrew from TPP in January of 2017 and is still floundering around trying to get a replacement for it almost 2 1/2 years later.
Tariffs are not paid by the country they are applied against. They are paid by consumers in the form of higher prices. China has already been looking at other markets for its goods, and other suppliers for what it imports from the US. I've said from the beginning of this back and forth stupidity that China is in a better position to weather a trade war than the US. With its command economy and population that overall supports the government and views China as the victim, they are willing to tolerate more hardship than the US. China has more allies as well, The current administration has alienated most of those that would normally stand by it. Inflation, lost markets, and loss of jobs dependant on Chines imports. This will not end well for the US.
The risk of Apple being hit in the crossfire has always been there. Apart from the purely economic aspects, the US-Huawei-China situation will also weigh on the outcome.
I think China wants to drag things out until the elections.
If they hit Apple in the meantime, Apple will just have to absorb the impact.