Trump’s latest threat of putting levies of $500B in imports would include almost everything China ships to the U.S., including iPhones, which are assembled in China. Trump’s proposal could tax the phones both within China and upon entry to the U.S.
By assembling its phones in China, Apple Inc. was able to tap into China’s massive workforce and manufacturing capabilities. But this also makes iPhones a Chinese export, and now, trade disputes can make Apple’s most profitable product subject to tariffs. Not only that, but China is also Apple’s most important market outside the U.S.
Previously, smartphones were excluded from the levies on $34 billion of Chinese goods imposed on July 6, and are not expected to be included in the second round in August, or the third round of $200 billion, according to Trump administration.
But, trade experts report that recent threats from President Donald Trump, of imposing levies on a total of $500 billion in imported goods, will probably include about everything shipped to the U.S. from China, including iPhones. According to data from the International Trade Centre, last year, the U.S. imported about $45 billion in mobile phones from China. But China annually imports only about $130 billion in goods, from the U.S.
It is, therefore, not expected that China would strike back with tariffs on goods, but rather, by imposing higher duties and making American companies penalize for it. Apple is a probable target because the iPhone holds a share of 9% in China’s smartphone market. No comment has yet been made on this by Apple.
But in March, Apple CEO Tim Cook had visited Beijing and called for an open trade, at an event held by the Chinese government. Later, while visiting the White House in April, Mr. Cook had told the President that tariffs would not be the right way to deal with trade issues.
Making Apple vulnerable carries risks for both parties. If tariffs make the popular smartphone expensive, it could anger consumers in America. It would be a huge mistake for the U.S. to take on a company that has promised to contribute $350 billion to the U.S. economy over the next five years.
China cannot risk it either as Apple is responsible for the employment of about 10,000 people directly, and for providing about 3 million jobs indirectly through its supply chain, as well as for employing about 1.5 million app developers there.
China had harmed Apple’s business in 2016 when the government had stopped its online music and book services. This shows that such threats can cause a lot of damage to the world’s leading phone company.
Source: Seeking Alpha