Apple asks U.S. for exemption from tariffs on Apple Watch, AirPods and more

Apple asks U.S. for exemption from tariffs on Apple Watch, AirPods and more
Prior to September 1st, Apple was barely exposed to the Trump administration's import tax on products imported into the U.S. from China. Certain cases for the iPhone and iPad were subject to the tax because, like most Apple products, they were designed in the U.S. but assembled in China. The U.S. has traditionally run a large trade deficit with China because U.S. consumers have more disposable income than their Chinese counterparts, and can afford to buy a larger amount of goods from China than their consumers buy from the states. But U.S. President Donald Trump equates such a deficit with "losing" even though most economists disagree.

In an effort to bring down the deficit, Trump initiated a trade war with China and announced that the U.S. would charge tariffs on goods imported from China. The president tried to make it appear as though the tariffs have forced China to pay millions of dollars to the U.S Treasury as he once tweeted. But that is simply not true. Tariffs are an import tax that U.S. companies pay. Firms, like Apple, can pay all, some or none of the taxes and pass the balance on to consumers by raising prices. Apple decided to "eat" the cost of the tax on the aforementioned cases so that their retail prices would stay the same.

Two of Apple's red hot wearables are getting socked with a 15% import tax

On September 1st, another tier of Chinese imports became subject to the tariffs. This tier of imports includes the Apple Watch and the wireless Bluetooth AirPods. These two products are the leaders in their respective categories and their success led Apple to report earlier this week that Wearables revenue rose 54% year-over-year during the firm's fiscal fourth quarter.

Bloomberg reports today that Apple has filed with the the U.S. Trade Representative’s Office for waivers on 15% tariffs that are being charged on 11 Apple products including:

  • Apple Watch
  • AirPods/Beats wireless earbuds and charging cases
  • iPhone parts including battery and smart battery case
  • iMac, storage for Mac Pro, battery for MacBook
  • Beats Pill+ wireless speaker
Apple says in the filing that it cannot find a source outside of China than can supply it with the parts it needs for the coming year. The decision on whether to waive the tariff on a Chinese import is based on whether the product can be sourced from other countries, or if it is considered important to Chinese industrial production. Also taken into consideration is whether the tariffs will cause "severe economic harm" to the company (in this case Apple) or the U.S. Last year, Apple sought exemptions on 25% tariffs that were set to be charged on 15 components for the MacBook Pro. The company was denied relief on five of the components, but was able to avoid paying the import tax on ten of them. Last month, Apple announced that it would produce Mac Pro computers at a facility in Austin, Texas that it has owned since 2013.

The Trump administration was also planning on taxing smartphones imported from China on September 1st. But to keep prices from potentially rising during the Christmas holiday season, the 10% tariffs on some consumer products, including smartphones, will kick off on December 15th instead.

In the past, President Trump has warned Apple that the only way for the iPhone to avoid getting hit by tariffs was to move production of the device to the states. Apple responded by trying to explain to the president how tariffs really work. And while Apple has been thinking about moving some of its iPhone production out of China, it probably would be countries like India or Vietnam that would be beneficiaries of such a move. The company already produces a limited number of iPhones in India for the domestic market.



1. Alcyone

Posts: 542; Member since: May 10, 2018

Time for consumers to put more pennies in the light bank to cover the costs. Apple wouldn't be nice enough to cover all the difference. Then again, maybe some will get the exempt. This scenario was bound to happen, it's now, rather than later. Short sightedness got the best of Cupertino.

3. sgodsell

Posts: 7531; Member since: Mar 16, 2013

Apple was greedy enough to leave the US in the first place, but now that things are getting more expensive. Apple wants a break, or a hand out. What about giving your customers a break? No? Apple knew full well by removing all manufacturing from the US in the first place would kill off US jobs. Apple didn't care back then. So why should anyone care right now. Your products are overpriced to begin with, and Apples profits prove that. There is a fitting expression that is perfect for Apples scenario right now. "You made your bed Apple, now lie in it.". If not Apple has enough followers who always say things like take my money. So Apple take more of your customers money.

9. mackan84

Posts: 616; Member since: Feb 13, 2014

You guys sounds like idiots. Think about it yourself, if you can buy the same smartphone for less money at another store. Wouldn’t you buy it there? Or if you invested your money into a project and suddenly the government taxed that project with an extra 15%, wouldn’t you want those in charge of the project try to do something about that? Or if you was in charge of that project try to explain to your investors why they won’t see that 15% and just be fine with it.

14. sgodsell

Posts: 7531; Member since: Mar 16, 2013

You do know Apple left the US many, many, moons ago. Apple increased their foreign operations over sea's back in the 80's. Apple increased again back in the 90's, and again throughout the 2000's. This isn't about Apple any more. Because many companies and manufacturing left the US, because of high taxes, and high wages. Apple like all the other companies that did an exodus of the US, were not thinking about the people or the country from which they came, but profits were the priority. Not the people. You know what kills me, is people and tech writers are not putting the full story together. Apple knew full well before the beginning of the summer that tariffs were coming down the pipeline. We all heard and knew about it. So Apple most likey increased production of the new iPhone 11's, before the hikes kicked in. We even saw some articles related to increased production. Also that tariffs hike is based on Apples manufacturing costs, and not based on Apples over hyped retail prices. The other thing that kills me is Apple has continued to invest in China over the decades. To increase the manufacturing and production facilities, to the tune of 100's of billions of dollars. All that money could have been spent over here, to make manufacturing facilities in the US. Sure there is taxes to pay, and wages to pay. But Apple could have built a fully automated plant by now, where no one is actually building an iPhone. Only pay wages to those that maintain the new manufacturing facilities. The workers at Apple's new plant don't assemble any iPhones, they only maintain the robots and production lines. Even car manufacturers are trying to add more automation all the time. Apple could easily start out in the US with full automation, because they don't have any manufacturing workers in the US, and they don't build any iPhones, iPads, or iPods in the US. Full automation is what Apple should be looking at in the US.

16. mackan84

Posts: 616; Member since: Feb 13, 2014

You think it’s that easy don’t you? Every part of the iPhone is from a different factory, mainly China. Then you have contracts, you have to pay tolls and so on. If it was that much easier and cheaper don’t you think Apple would’ve done it already? Besides they’re probably one step from moving a big portion to India. Wasn’t Qualcomm building a huge factory in the US a couple of years ago? Giving thousands of jobs and now just sits empty, like a ghost-house. It was all a false scheme to silent politicians. Couldn’t care less where Apple operate, but I know that your pipe dreams ain’t even close to reality.

20. sgodsell

Posts: 7531; Member since: Mar 16, 2013

Of course Apple has setup contracts with suppliers and the Chinese. Who do you think setup and negotiated those terms for Apples benefit in the first place with China. Tim Cook. But nowadays setting up in China has come back to haunt most companies in the long run. Today if a new manufacturing facility was to start up in the US, then ultimately it would be cheaper in the long run to make it fully automated. Car manufacturers can't do it because of labour laws and unions. But if new iPhone, iPad manufacturing facilities were setup today, it would be in the best interest, and much cheaper in the long run to have fully automated manufacturing of those iPhones and iPads. You act like it can't be done, but it's much easier and cheaper today to setup a plant like that. Try and remember it was labour laws and taxes that pushed most of the manufacturing away from North America in the first place. Now it would be much easier to bring back some manufacturing if they were fully automated, because you won't have any employees to worry about, that's because they don't have any plant workers today in North America. The only employees that you would need are shippers, robotics engineers, and line maintenance personal.

17. NarutoKage14

Posts: 1345; Member since: Aug 31, 2016

An iPhone made in a fully automated US factory would still cost more to produce than a non automated factory in China. With publicly traded companies it's always about maximizing profits for shareholders.

24. sgodsell

Posts: 7531; Member since: Mar 16, 2013

Long run manufacturing in China cost more for North America.

44. sgodsell

Posts: 7531; Member since: Mar 16, 2013

Right now it would cost a company more to setup in America. However, like I said in the long run it would be better. Especially since what's to stop even more tariffs being added on later, or other types of import taxes. Not to mention some jobs could return to America. If everything is left in China, then the only ones that truly benefit, is the Chinese. Last quarter only 5% of the smartphones that sold in China,cwere iPhones. If you honest believe that it is cheaper to manufacture in China with sales declining to the point that Apple will have hardly any sales benefit in China, then your idiot if you can't see that it's worse to keep manufacturing in China.

45. jiangqiushi

Posts: 35; Member since: May 28, 2019

Please give us one example of any American consumer electronics product company that did what you said. If Apple did what you described here, they wouldn't become today's Apple.

10. Alcyone

Posts: 542; Member since: May 10, 2018

I agree. Haven't come across an Apple product lately worth keeping. The new iPhone was a let down. My 5s was the Apple product I owned.

2. Rocket

Posts: 698; Member since: Feb 24, 2014

Come on! they have enough money to take the hit.

5. sgodsell

Posts: 7531; Member since: Mar 16, 2013

Of course they have enough money. Apple had record profits last quarter, and that is with the decline of iPhone revenue to the tune of 3.4 billion dollars less.

39. mootu

Posts: 1537; Member since: Mar 16, 2017

Problem there is that Apple is the darling of Wall Street and every time Apple takes a hit on anything then Wall Street panics, usually this sends markets into a downslide for a short while.

4. JCASS889

Posts: 599; Member since: May 18, 2018

Apple does not care about anything but their profits, it's truly disgusting how a corporation can try to act so kind and caring yet truly be so greedy. Only reason I don't buy their amazing phones and other devices.

7. Whitedot

Posts: 863; Member since: Sep 26, 2017

How well put :"how a corporation can try to act so kind and caring yet truly be so greedy". Apple like any other OEM are money making machine first. Second they known to be very greedy. Kind and charitable never rythms with greed.

12. JCASS889

Posts: 599; Member since: May 18, 2018

And yet people praise them at every step. Even when they are being ripped off.

32. mrochester

Posts: 1035; Member since: Aug 17, 2014

People praise Apple for good products and services. If they didn’t make good products and services people wouldn’t praise them. Where this bizarre idea comes from that Apple gets praised for nothing I’ve no idea.

18. tedkord

Posts: 17456; Member since: Jun 17, 2009

No major corporation cares about anything but their profits. To the extent they do the right thing (child labor, environmental impact, etc...),it's all done to avoid the bad publicity, which could negatively affect profits.

6. shawman

Posts: 79; Member since: Sep 18, 2012

Considering China controls the rare earth metals, I am not sure how its possible for Apple to move everything out of China. I guess they can assemble the phone out of India or Vietnam. But that is still hard. Obviously Apple dont want to impact the insane margins they have. Stock is at all time high and just overtaken Microsoft again to be Number 1 Market Cap.

11. Back_from_beyond

Posts: 1462; Member since: Sep 04, 2015

But to ask for en exemption and to have it granted would essentially mean they'd have to grant everyone an exemption from the tariffs. The government can't just say 'Well Apple needs to maintain its large profits, but everyone else doesn't matter.' Small businesses would deserve an exemption more than Apple, for them it could mean the difference between a small profit and sustaining their business or potential bankruptcy. For Apple to seek exemption is pure greed and Tim Cook behind closed doors will tell Trump that granting the exemption will benefit the American economy and workforce, because if the tariffs are put in place they'll have to make budget cuts, delay plans for new projects in the USA and so on.

33. mrochester

Posts: 1035; Member since: Aug 17, 2014

Better for Apple to petition for an exemption and have it apply to everyone than no-one getting an exemption and prices going up. Apple also have the clout and goodwill to make a difference right at the top.

13. JCASS889

Posts: 599; Member since: May 18, 2018

Hey Apple why don't you take the hundreds of billions of dollars you have in cash and actually be generous for once and pass the saving to the consumer.

15. darkkjedii

Posts: 31530; Member since: Feb 05, 2011

I don't know of one for profit business, that works that way. Even small startups get greedy, once they make it big. I dont mind Apple's prices, cause I'm used to them, and know they're not getting any lower. I just want to see Apple give more bang for the bucks I spend. Samsung is also a greedy company, but Samsung gives way more bang for the buck than Apple.

19. tedkord

Posts: 17456; Member since: Jun 17, 2009

The only purpose of a for profit is profit. As much profit as possible. Apple, Samsung, Microsoft, Google, IBM...there are no altruistic major corporations. Not a single one actually cares about its customers past their wallets.

21. darkkjedii

Posts: 31530; Member since: Feb 05, 2011

Well said, and 100% agreed. That's exactly what these Apple fanboys need to realize, and understand. I have zero brand loyalty, just make what I like or need, and I'll buy your product...don't, and I won't.

25. mrochester

Posts: 1035; Member since: Aug 17, 2014

Exactly. I only ever buy or use products that that I want or need. Don’t make a product that I like or need? I ain’t buying it. That’s why I have no amazon echo, no google home, no android, no google services, no streaming music, no streaming video. All wastes of money or bad products.

26. tedkord

Posts: 17456; Member since: Jun 17, 2009

Or, to sum it up, no Apple logo, you don't buy

28. darkkjedii

Posts: 31530; Member since: Feb 05, 2011

It only took you 6 words to nail him lol.

29. mrochester

Posts: 1035; Member since: Aug 17, 2014

No, the only stipulation is that it must be a good product I want and need. It’s why I use DuckDuckGo as a search engine, outlook for email, Windows 10 on my self-built desktop, Macos on my laptop, iOS on my phone and tablet, watchOS on my watch and iCloud as my cloud sync service. If you don’t make a good product I want or need, I ain’t going to buy or use it.

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