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.
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.
Comments
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.
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.
The tariffs have abolsutely worked for the purpose they were intended: Bringing them to the table. Tariffs don't "work" for their own sake. They do "work" when they are used as leverage.
I completely disagree. I don't like tariffs in general. But it is precisely because China has a command economy and is robbing us blind that we need to use them. Trump understands leverage, if nothing else. So far, it has brought them to table. They even moved up their recent meetings with some urgency. As for is in a better position, it's us. We have a massive trade deficit with China. No other country can come even laughably close to replacing us in terms of what we purchase from China. The tariffs and other non-tariff barriers we are placing on them are affecting China much more than their retaliation is affecting us.
You can't judge the situation by microcosm. No doubt, some of our prices will increase. I don't know about the GDP claim. That may be true to some extent, but you'd expect to see it in inflation as well. So far, we haven't. The point is that overall, we are doing much more damage to China than they are to us. It's not about Trump, it's about math. This is what happens when you have a massive trade deficit. They need us to buy their products more than we need them to buy ours.
It’s one thing to say trade sanctions aren’t working and are hurting consumers. Consumers have been suffering for years because their jobs have moved to China. What’s the solution?
In these conflicts both sides get hurt and there is collateral damage beyond geopolitics.
At this point in time I think Apple would prefer not to get sucked into the conflict. If it does, the political side will take on a new meaning, making things even more unpredictable.
It's about time that somebody has the balls to stand up to China. It should have been done a very long time ago, decades ago, but better late than never.
With their massive IP theft, currency manipulation, hostile rules for foreign companies and their trade practices, I'm glad that the US is finally taking a stand.
US economy = strong. Now is the right time to make that stand.
The problem for Trump and the Republicans is that their jobs depend on the economy continuing to hum along. The Chinese know that.
If I had to guess, I’d say the Trump administration is going to watch the economy like hawks, particularly in purple states. We may even see them pressuring the Fed to drop interest rates if things go south.
But tinkering with the economy is fraught with risk (deflation being the big one). Still, the Republicans are very much playing the short game, so I’d guess they’d take that chance if it came down to it. Heck, they’ve already stopped any more rate hikes....
As regards China, thou doth protest too much, methinks. China is so very, very far from being a true competitor to the US and the "free world" it isn't even a joke. Yes, they're pirates. In the larger scheme of things, that's their main weakness, and the only way they can get out of that box is to free their people. Anyone see that about to happen?
(crickets)
(The following is Off Topic, and possibly this post will get removed by the editors. Hope you get to read it before that happens.)
You and I are both intelligent enough to know what I mean by long game versus short game, and the inherent problem with playing the short game.
I'm 73 years old. Once upon a time, I thought of Republicans as the Noble Opposition. That went by the wayside a while back, but never quite so deeply into the weeds as it now has. Why? Because they've played the short game, and then the even shorter game, and now the even shorter game, searching out any and all ways to get the votes to give them power. To do what? Give power to the crazies?
I don't say that all Republicans are unprincipled. I have too many Republican friends to think that. But their party has sold its soul to the devil for a mess of pottage, to the point where they are no longer even close to being the party of fiscal conservatism they once were and that I once admired. How bad is it? It's so bad that the Democrats are now the fiscal conservatives!
I call myself a Democrat and a liberal, but a few decades back I was a moderate. And I really haven't changed. Kind of says it all....