How Apple stockpiled iPhones to avoid tariffs and keep prices low for a while
In order to protect its customers from high import fees, Apple shipped an impressive amount of products, including iPhone, to the US from over seas, with very little notice. Here's how it did it.
Apple Park
Big Tech is projected to be one of the industries hit hardest by the Trump Administration's newly instated tariff plan. Apple alone is projected to take a $33 billion hit, a number much higher than anyone -- including Apple -- would have expected.
Apple may not have anticipated getting hit as hard as it did, but that doesn't mean it sat idle. In fact, some quick thinking may have bought it a little more time.
In the last week of March, Apple shipped five flights worth of Apple products in three days to the US, in hopes of stocking its warehouses. Any other year, this would have been a slow shipping season for Apple as it started to wind down the current-year products, and start manufacturing the September releases.
"The reserves that arrived at lower duty will temporarily insulate the company from the higher prices that it will need to pay for new shipments under the revised tax rates," a source told The Times of India.
The products came from both China and India. Allegedly, Apple's US warehouses are stocked for several months ahead.
On April 2, or "Liberation Day" as President Trump called it, a new assortment of "reciprocal" tariffs was applied against every foreign country in the Apple supply chain. While there's a minimum 10% tariff on all goods entering the United States, imports from China were hit with a 54% tariff.
And, a Monday announcement by the president threatened another 50% application, should China not back down. That would bring tariffs to 104%.
While the Trump administration says that tariffs are paid by the country that the goods are exported from, that's not the case. Instead the importing company pays the tariffs, and they then, in turn, generally pass that cost to the consumer.
That hike is set to devastate the consumer goods market, driving up prices for the end consumer. The iPhone 17 Pro is already predicted to cost more than $2000 because of it.
But the next-generation iPhones aren't the only thing that could see price increases. If Apple's stockpile were to dry up, the iPhone 16, which currently retails for $799, has been predicted to jump to more than $1140, which is more than the price of the current iPhone 16 Pro.
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If companies do that, it will clarify for customers the effects of Trump's tariffs. That might make it harder for Republicans to toe the line.
For example, where are getting the rare metals that go into producing the internal components? All from recycle? I can tell you that the US doesn't have vast amounts the way that other countries do. How about the alkali-aluminosilicate glass? I think Wisconsin is the only decent source of low-iron silica in the US, but I don't know how much they have compared to other locations around the world, what the comparative quality is, or how much it costs compared to other sources. How about lithium for the batteries? A google search tells me that the Albemarle Silver Peak mine in Clayton Valley, Nevada, is the only currently operating lithium mine in the United States. Is that enough for all the batteries that Apple uses for all their products? What about every other company that wishes to sell in the US?
Here's the most recent conflict mineral's report from Apple to the SEC...
https://s203.q4cdn.com/367071867/files/doc_downloads/2024/04/Apple-Conflict-Minerals-Report.pdf
What about tantalum? I see that "mining for tantalum in the United States has not occurred since 1959." Is that not a problem? Does the US have an inexhaustible stockpile of tantalum right now? How about tin? Google says that stopped in 1993? Can that start back up with reasonable results? How about tungsten? No active mining today, but google does suggest that "significant tungsten deposits occur in [12 states]" so why isn't the US currently mining it? The reason is cost, but is that a minor cost or high cost to get that up and running again? BTW, that was had from a single page on that PDF (above).
https://s203.q4cdn.com/367071867/files/doc_downloads/2024/04/Apple-Supplier-List.pdf
When you look at this supplier list (above) how do you recreate all of that in the US? Even the camera is a component that isn't even Apple's IP. I believe that's still being provided by Sony. So even if you get all the components shipped to the US and pay American workers $25+ an hour to do final assembly you're still looking at massive assembly costs and tariffs that make the notion of your "very simple concept" a more costly and complex endeavor than simply using the current partners.
Finally, we may bel living in an Orwellian 1984, but it's not longer the year 1984 when Apple's Fremont plant started. Jobs tried it but it still wasn't the correct move 40 years ago with the small number of computers Apple was producing with nearly all US component and materials sourcing. Don't believe me? How about a former Apple engineer who worked there?
https://www.nytimes.com/2018/12/15/business/apple-california-manufacturing-history.html
To reiterate, American is being ripped off so let's rip off the American people? That makes sense to you?
The 50% tariff won't move jobs to U.S. (do you really want to work for 50 cents/hour?). Even 500% wouldn't do it.
The tariff will only make products more expensive, reduce margins at the cost of shareholders, reduce jobs in the U.S. to keep margins/due to reduced sales etc.
You don't even have enough workers to do all of it. Go make a proper plan instead!
https://en.wikipedia.org/wiki/2024_United_States_federal_budget#/media/File:Federal_Government_annual_spending_and_revenue.webp
This has accumulated over 20+ years. When the debt is higher than a country's GDP (as it is in the US) then it's in a danger zone. There's a level where the economy collapses catastrophically.
There are a few causes. One is the population time-bomb that is affecting most countries now. When the economy is bad for younger generations due to depressed wages, higher cost of housing etc, they delay having children and have fewer children. This creates an elderly population that strains social security.
Another cause is trade deficit. The biggest one for the US is with China. The aim, as described in the following video, is to have no deficit:
https://www.youtube.com/shorts/v4g6pfpngEM
Vietnam offered to negotiate in response to the tariffs but their offer was rejected apparently due to still resulting in a deficit:
https://www.msn.com/en-us/money/markets/vietnams-tariffs-offer-rejected-by-trump-adviser-not-a-negotiation/ar-AA1CrSiw
Some countries block foreign companies from trading at all, this isn't considered a tariff but it passes billions to other companies:
https://en.wikipedia.org/wiki/List_of_websites_blocked_in_mainland_China
There are ways to deal with the debt: cut public spending, increase taxes, reduce trade deficits, increase GDP, increase population (birthrate or immigration), increase retirement age.
If tariffs are left in place and have to be paid for then it's a tax on the people of the country imposing the tariffs. If countries implement measures to reduce the deficit then they bear the cost.
Some harm to GDP is from losing manufacturing to other countries, which often happens by other countries implementing harmful working conditions to lower costs significantly. Some manufacturing of military components has been moved and has become a national security risk.
Tariffs are not the end goal. The goal is to have close to zero deficit trading, domestic manufacturing, more jobs, higher birthrate. But until they get those requirements, they are planning to use tariffs as a cudgel to achieve it. It's reckless, probably won't be effective and they should try to achieve their goals more responsibly.
If the people of the country imposing the tariffs end up paying more, this actually results in paying more taxes to cut the deficit, assuming they keep buying.
I doubt it would impact iPhone sales much. People mostly pay on contract so even a 50% increase would be $30/month vs $20/month. An extra $10/month is minuscule vs people's typical monthly expenses. This is why the iPhone is such a good product for Apple because even at a premium price point, it's an inexpensive product relative to everything else.
There's a sense that they are trying to fix the debt issue urgently and it doesn't seem like it needs to be done that urgently. Although it's a critical issue to solve, they could implement fixes over the course of 1-2 years instead of 'by Wednesday, or else'.
They could also communicate their goals more effectively. They can post an official page showing the debt, what's responsible for it, their proposed fixes, projections and their success rate. Like the following site but with more accurate numbers and clearer information:
https://www.usdebtclock.org/
https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/debt-to-the-penny