Apple supplier Pegatron says tariffs will mean third world-style shortages for US
The chairman of Pegatron, a key iPhone manufacturer, says he won't react to Trump's tariffs in the short term, but US consumers will soon face empty shelves.
A Pegatron facility -- image credit: Pegatron
While Trump's nonsensical "reciprocal" tariffs hit Apple hard and the exemptions that it's got are temporary, some sources think Apple could ultimately benefit. According to Reuters, however, those sources do not include T.H. Tung, chair of iPhone manufacturer Pegatron.
"Within two months, shelves in the United States... might resemble those in third-world countries, where people visit department stores and markets only to find empty shelves, all because everyone is waiting and seeing," Tung said on Monday, April 28, 2025.
This was not, though, an announcement that Pegatron itself would necessarily raise its prices. "Just because Trump raises tariffs doesn't mean the rest of the world will do the same," continued Tung. "We won't immediately adjust our long-term plans just because of two or three months of tariff changes."
"Manufacturing bases require long-term planning," he continued. "Taiwanese contract manufacturers are sticking to their overseas plans."
Despite Apple's massive airlift of iPhones and Macs to beat tariff deadlines, Tung doesn't see manufacturers ramping up shipments in general. While the tariffs are officially paused -- except for with China, and except the pause has been halved -- Tung notes that countries still face a 10% tariff anyway.
He says that manufacturers won't ramp up production if they believe the 10% tariff may shortly be changed or repealed. Nonetheless, Tung says that the tariff war has disrupted the global supply chain.
Since at least 2022, Pegatron has been working to expand its operations outside of its previous main market in China. It has built manufacturing bases in Mexico and Southeast Asia, although it has also sold off its Indian iPhone business.
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Comments
They aren't based on anything, they aren't reciprocal by any definition of the word, and the math that they used to derive them makes no sense at all.
And, worst of all, they injure US consumers more than they do anything at all to foreign interests.
The elimination of the USA's massive trade imbalance with the rest of the world is a necessity. The USA has been living on borrowed money for a long time and using it for excessive consumption. Effectively, China and other countries lends the USA money to buy their goods.
It is likely that if Trumps sticks to his guns this rebalancing will be achieved but at the expense of the current generation of Americans, who will pay the price for previous the generations over consumption.
The rest of the world will not pay this debt but they will suffer as world trade will decrease without American over consumption.
On balance this probably has to happen but it would be better done with a more stable man at the wheel.
There's nothing new about reciprocity between governments. Hell, even interstate wine shipments are governed by reciprocal shipping laws. California wineries can ship directly to consumers in most other states because those states' wineries can do the same and direct ship wine to California consumers.
As for the tariff calculation, there is a formula. It's based on trade balance between imports and exports to a country.
For example, the US imports $136B in products, yet only exports $13 so the trade imbalance is -$123B which equates to 90% (123 divided by 136). The Trump tariff formula just halves that trade balance percentage: 90% / 2 = 45%. So the Trump tariff on Vietnam is 46%.
Thailand: $63B imports, $17B exports, balance -$46B, 72% imbalance pct. Tariff is thus 36%, half of that 72%.
So there is some rudimentary calculation, very crude and basic. Economists don't think it will actually provide any advantage for the US economy. In that sense, yes they are nonsense but the calculation isn't random. It's based on something even if the reasoning for it is defective.
But for sure, US consumers will be paying more for things next year than this year.
The damage to the US dollar's reputation as a reserve currency is by far the more grave effect of these tariffs. Even if all the tariffs were rolled back to more reasonable levels, there's still far less trust by foreign investors in the US dollar and Treasury notes. There has been a significant swing into gold and European bonds, something that will not swing back for years; it will likely happen when a new administration takes over and instills more trust in foreign investors. And let's face it, the rest of the world knows that the current White House administration is very, uh, capricious. There's no stability at all with the current administration, things can be flipped at any given hour. Not being able to plan ahead for the long term will slam the brakes on a lot of dealings with the USA.
The Pegatron CEO is probably right that American consumers will see tightening availability for some items but not all. There's a dropoff in container ship arrivals in the Port of Los Angeles for the upcoming weeks indicating fewer imports from Southeast Asia. A week ago I read some article reporting that Christmas decoration factories in China were idle and some companies hadn't received a single wholesale order from the US during what should be their busiest time for wholesale orders.
Even the service industry (travel, hospitality) is seeing a dropoff in bookings for this summer, including overseas visitors, so growth may come to a full halt. It won't happen overnight but for sure we will be looking at a vastly different economic climate a year from now.
The "calculation" isn't reciprocal at all. It is nonsensical as it applies to tariffs, and isn't based on an economic foundation, as you've said.
Let's remember that there were reciprocal tariffs that existed for some products before the current wave.
Reciprocity happens when both countries levy the same tariff percentage on each other. Leaving China out of the discussion, the other countries (and the EU) stated that they were going to increase tariffs on imports coming from the USA to the new levels proposed by the current administration. There's a temporary reprieve right now for many regions -- a stalemate one might say -- but at some point reciprocal tariffs will kick in for both sides. If the USA levies 36% tariffs on Thai imports, Thailand will levy 36% tariffs on USA imports. That's reciprocal. Because Thailand has an interest in protecting its economy and its companies too.
It's the same with visas. Travel reciprocity is when different places have the same standards. Like the EU waiving visa requirements for US travelers and vice versa.
And yeah, a tariff is basically a federal sales tax without showing up on a store receipt. Governments like revenue that is hidden from plain view for consumers like gasoline taxes, alcohol taxes, tariffs, municipal bond measures, etc.
Lesotho is hit by 50% - a country doing 98.9% less per capita than the US is tariffed to death due to Levi's and their $3/day salaries. For the US to be a country so hungry for $3/day jobs that Africans must die for it?!
I miss the country of "The Hill We Climb".
Here's a TIME article from mid February on the topic:
https://time.com/7222082/what-are-reciprocal-tariffs-who-might-be-impacted-by-trump-plan/
Not only did the current administration apply reciprocal tariffs, it subsequently also increased them in many markets. And then escalated tariff wars with certain countries.
Like I have repeatedly said, these tariffs aren't really beneficial from a global economy perspective. And the reasoning behind them is even more debatable. But the calculation itself isn't pulled out of thin air. The logic behind using that particular formula is not sound but that's what the current administration has decided on. They aren't picking percentages randomly out of a fishbowl.
However the main point the Pegatron CEO is making is that the flow of goods between borders will be constrained to the point where American consumers will see some empty shelves. Not every product but for some things yet. My guess is that we'll start to see it in August/September with some back-to-school supplies becoming harder to find, followed by Halloween costumes/decorations, then Christmas decorations will likely get hit hard. The lead time for these wholesale orders is like six months so the Christmas merchandise will be the first major wave under the higher tariffs just due to timing.
These aren’t even strictly MAGA tariffs as many of his MAGA supporters aren't smart enough to see how this will negatively affect them.
Note that the same can pretty much be said most other places. If the US applies a higher tariff on Country A's goods, Country A's electorate doesn't head to the polls to vote whether or not their country should react with a similar tariff on US goods. Nope, their leader typically applies the tariff without voter approval.
You also make no sense when you state that
- "these tariffs aren't really beneficial from a global economy perspective,"
- "the reasoning behind them is even more debatable," and
- "The logic behind using that particular formula is not sound,"
but then you say "They aren't picking percentages randomly out of a fishbowl."I suppose literally, no, they're not using a fishbowl, but your other three points make the case that they might as well be. Faulty logic to select a random formula to pursue a policy based on faulty reasoning is lunacy, because it does mean that at least figuratively, the calculation was indeed "pulled out of thin air."
I'm beginning to think that maybe the arguments you're trying to make here are also pulled out of thin air.
Funny thing. They were rebuffed. They got no deal. Why is that? we can wonder. The answer is that Mr. Art of the Deal sees capitulation as weakness, so he must push for more and screw over friend and foe alike. There is no fair as fair can be. Let's not forget that the baseline here that has remained all along is a 10% minimum tariff on imports from every country (except Russia), even if they have imposed no tariffs, we have no trade deficit, or we have a trade surplus, or we have no trade at all, because penguins don't actually use money.
You can put all the lipstick you want on this pig, but everyone can see you and the pig wallowing around in a sty full of pig ***t.