On September 1st U.S. collections of a 15% tariff will begin on $125 billion of targeted goods (smartwatches, bluetooth headphones, flat-panel televisions, and many types of footwear) from China. While Apple’s wearables segment is within the targeted tranche, we believe there’s a low probability that tariffs are levied against Apple wearables starting September 1st and an even lower probability of that without an offset…
We believe the US does not want to be the first to add tariffs to Apple, given Apple is arguably the leading US Company and the face of American business in China. The optics of a US protectionist first approach penalizing a US global leading company while China doesn’t penalize Apple would seem to surrender the moral high ground.
If Apple wearables are tariffed by 15% for the next year, and Apple bears the cost, FY20 earnings would likely decline from about $12.80 to $12.70.
MacDailyNews Take: We’ll see where things stand if December 15th arrives before any deal and iPhone faces tariffs.