Apple Vulnerable in Escalating U.S.-China Trade Fight
China has always been integral to Apple’s remarkable success, as the country has allowed the iPhone maker to tap into its vast workforce and formidable manufacturing capabilities. However, The Wall Street Journal has highlighted that Apple could be vulnerable to China’s smartphone export tariffs in the escalating trade dispute.
Trade experts say President Donald Trump’s threatened levies on a total of $500 billion in imports would cover just about everything China ships to the U.S., including the iPhones.
On the other hand, China imports only $130 billion in goods from the U.S. each year, which limits its options for tit-for-tat tariffs. China could however retaliate with higher duties and punitive actions against the U.S. companies. Apple would be a likely target because of the iPhone’s 9% share of China’s smartphone market.
Mr. Trump could anger American consumers if tariffs make the popular iPhone more expensive. He would also be taking on the world’s most valuable company, which has promised to contribute $350 billion to the U.S. economy over the next five years. Included in that figure is a one-time tax of $38 billion on its overseas cash holdings, which came in response to a major overhaul of the U.S. tax code.
A tariff of 10% on a Chinese-made iPhone X would add about $37 to the import cost of $368 in the U.S., according to market researcher IHS Markit. Apple would either absorb those costs on the $999 device or pass them on to retailers and consumers.