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

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.

29 Comments

foregoneconclusion 12 Years · 2857 comments

About 5 years ago

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.

DAalseth 6 Years · 3067 comments

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.

avon b7 20 Years · 8046 comments

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.

genovelle 16 Years · 1481 comments

DAalseth said:

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.

True. Walmart already issued warnings that they would be increasing prices equal to the tariff percentage. Trust me they are not the only ones and those prices will not be going down. Higher prices likely also makes the inflates the GDP, so it would be just another false talking point.

libertyandfree 11 Years · 192 comments

foregoneconclusion said:

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.

Actually you are very wrong in you comment. The tariffs are having a big impact upon China's economy, their actual GDP growth (not the fake govt numbers) is below ours and sinking. Keep in mind China's GDP is only a little more than half of ours and they export a lot more to the US than we export to them. Moreover, the economic impact and slowdown in China is real spanning infrastructure buildouts to consumer products to real estate, etc. the company I work for can testify to this fact.

Also TPP had nothing to do with China and deals have been negotiated and are continuing to be negotiated with the countries involved in TPP.