How the U.S.-China trade war could hike Apple iPhone prices

“It’s been a week since the Trump administration raised tariffs from 10 percent to 25 percent on $200 billion worth of Chinese exports, and tech companies are still grappling with the consequences,” Klint Finley writes for Wired. “The existing tariffs cover a wide range of goods, but few finished consumer electronics. The next round could include laptops and smartphones, referred to as ‘automatic data processing machines’ in the government’s proposal. But even if finished electronics get a pass, existing tariffs on computer components such as power supplies and printed circuit boards could increase costs for consumers.”

“It’s still possible that the US and China could work out a deal that largely preserves the status quo. But Brian Keare, an executive at business analytics company Incorta, says the failure to reach a deal last week led to a growing fear among the companies he works with that the tariffs could continue for years,” Finley writes. “It’s too early to say how drastic the results of the conflict will be. Keare says companies he works with are still assessing the impacts of the increased tariffs on their businesses. ‘It quickly morphs into questions about absorbing the tariffs versus passing the prices on to customers,’ he says.”

“Analysts at JP Morgan estimate that Apple would need to increase the cost of iPhones by 14 percent to make up for the tariffs, though it could also opt to absorb some of the costs, at least for now,” Finley writes. “Companies are eyeing new places to do business. Supplier contracts and manufacturing that might otherwise have gone to Chinese companies are going to companies in India, Thailand, and Vietnam… The result might be a gradual disentanglement of [the U.S.’s and China’s] economies.”

Read more in the full article here.

MacDailyNews Take: Again, balance will come, perhaps sooner than many think.

I’m cognizant that in both the U.S. and China, there have been cases where everyone hasn’t benefited, where the benefit hasn’t been balanced. My belief is that one plus one equals three. The pie gets larger, working together. — Apple CEO Tim Cook, March 24, 2018

SEE ALSO:
Apple’s tariff tradeoff: Raise prices, suffer margin hit, or build more products outside of China – May 17, 2019
Nomura Instinet cuts estimates on U.S.-China trade skirmish – May 17, 2019
Trump administration blacklists Huawei putting Apple at risk of retaliation from China – May 16, 2019
The media is lying to you about President Trump’s China tariffs – May 15, 2019
Analyst: Apple investors ‘overreacting’ to U.S.-China trade war and Supreme Court App Store ruling – May 14, 2019
Apple, Deere & Co, retail in focus as U.S. releases fresh tariff list – May 14, 2019
Gene Munster: Apple likely to be spared from China tariffs – May 10, 2019
Apple shares drop 7% this week on fears China trade turmoil threatens iPhone sales – May 10, 2019
Apple’s iOS 13 rumored to drop support for iPhone 6, iPhone SE and iPhone 5s – May 10, 2019
Apple not yet hurt by China tariffs, likely to simply absorb the added cost – May 10, 2019
Apple temporarily escapes new tariffs as U.S.-China trade war escalates – May 10, 2019
Dow futures fall after President Trump tweets ‘absolutely no need to rush’ on China trade deal – May 10, 2019
China overplayed its hand with U.S. President Trump on trade, and it could cost them dearly – May 9, 2019
Apple CEO Tim Cook optimistic about U.S.-China trade talks – February 12, 2019
President Trump says U.S. doing well in trade negotiations with China – January 23, 2019
China’s 2018 growth slows to 28-year low, more stimulus seen – January 22, 2019
Apple CEO Tim Cook: I’m very optimistic about U.S.-China trade talks – January 8, 2019
Advisor to President Trump: Apple’s sales should pick up when U.S.-China strike trade deal – January 3, 2019

6 Comments

  1. There appears to be a long, dark tunnel for Apple shareholders in the near-term or maybe even longer. Apple will raise prices and get fewer consumers to upgrade while the Android manufacturers take even more market share away from Apple’s iPhone. The apologists will say it really doesn’t matter when it most certainly does to big investors who always seem to prefer companies with huge growth in market share percentage.

    It just doesn’t seem as though Apple can continue to ignore consumers who refuse to buy Apple products due to their higher cost. I hope Apple can prove me wrong, but so far things are looking downright ugly for Apple. No matter why Apple tries, it always ends up being called a doomed company.

    Of all the companies having ties with China, why does it have to be Apple getting smashed the most? It’s as though China tariffs and Apple go hand-in-hand and other companies are barely mentioned.

    At least Apple still has a mountain of cash to play around with. How about fewer buybacks and more acquisitions for greater revenue stream growth? Any business with less exposure to China will do quite nicely.

    1. Just like your choices of App Stores, you have (binary) choices over your gambling. You’re in or you’re out.
      Hype cuts both ways.

      Yes, I say so without anxiety, I have no skin in this game.

    2. A couple possible reasons Apple ‘getting smashed the most’ that come to mind:

      1) Apple’s insistence on a single manufacturing point, China for iOS products. This may be remedied when the factories they were required to build in India by their government comes on line. Android OEMs on the other hand are manufacturing in multiple countries, one of the largest being Korea where LG and Samsung are located.

      2)As Google Chrome and Google Android are customized implementations of open sourced Chromium and AOSP respectively, Android compatible devices may still be produced in China even with the announced blacklisting. This will allow Android OEMs in China to get back up to speed very quickly with Google Android once the blacklist is removed.

  2. One does wonder if the Golfer In Chief uses US-manufactured golf balls. More than 170 rounds of golf played so far in his term. In the rough, mostly….

    Is this what a hard working executive does to correct the perceived trade imbalances all over the world?

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