“The phrase on the back of iPhones — ‘Designed by Apple in California. Assembled in China’ — highlights a key reason for the company’s remarkable success but also shows how exposed it is to the escalating U.S.-China trade fight,” Tripp Mickle and Yoko Kubota report for The Wall Street Journal. “By assembling its phones in China, Apple Inc. tapped into China’s vast workforce and formidable manufacturing capabilities. But it also made Apple’s most-profitable product a Chinese export—one that could be subject to tariffs in the trade dispute. On top of that, China is by far Apple’s most important market outside the U.S., leaving it exposed if Beijing decides to retaliate by squeezing its sales.”
“Smartphones weren’t included in the levies on $34 billion of Chinese goods imposed on July 6, nor are they targeted in a second round worth $16 billion that is expected in August. They also haven’t been included in a third round of $200 billion in goods that the Trump administration identified earlier this month,” Mickle and Kubota report. “But now, President Donald Trump is threatening levies on a total of $500 billion in imports, which would cover just about everything China ships to the U.S., including iPhones, trade experts say.”
“China imports much less from the U.S.—about $130 billion in goods annually—which limits its options for tit-for-tat tariffs. But China could retaliate with higher duties and punitive actions against American companies,” Mickle and Kubota report. “Apple would be a likely target because of the iPhone’s 9% share of China’s smartphone market, according to Mr. Dollar and other trade experts.”
MacDailyNews Take: Hence insurance policies already in place:
• Apple launches $300 million China Clean Energy Fund – July 13, 2018
• Apple to spend $507 million to set up two more research centers, boost investment in in China – March 17, 2017
• Tim Cook back in Beijing, says Apple will further boost investment in China – August 16, 2016
• Apple invests $1 billion in Chinese ride-hailing service Didi Chuxing – May 12, 2016
• Apple expands renewable energy, new environmental initiatives in China – May 10, 2015
• Apple invests in China solar project – April 16, 2015
“China also has an interest in keeping the peace, given the number of jobs Apple provides. About 10,000 people in China are employed directly by Apple, the company said,” Mickle and Kubota report. “Indirectly, Apple says it accounts for three million jobs there through its supply chain, which includes contract manufacturer Foxconn Technology Co. It also says it provides work for 1.5 million app developers in China.”
Read more in the full article here.
MacDailyNews Take: We live in the era of overwrought hand-wringing.
SEE ALSO:
Why the US-China trade war may not have much impact on Apple – July 17, 2018
What trade war? Markets shrug off US-China dueling tariffs – July 6, 2018
The Trump administration told Apple it would not place tariffs on iPhones assembled in China – June 19, 2018
Apple CEO Tim Cook doesn’t expect a full-blown trade war between the U.S. and China – June 5, 2018
China now as big a market for Apple as Europe on strong growth and iPhone X success – May 2, 2018
Designed in California. Assembled in China. How Apple’s iPhone skews U.S. trade deficit – March 21, 2018
Analyst: President Trump’s tariff impact on Apple would be just a ’rounding error’ – March 7, 2018