As we've pointed out, the trade war between the United States and China has not yet touched the Apple iPhone or other Apple devices. On Friday, the U.S. raised the tax on $250 billion worth of Chinese imports; China retaliated today by adding tariffs on $60 billion of U.S. imports. So far, Apple doesn't have to decide whether to protect its margins by raising the price of the iPhone in the states. Morgan Stanley analyst Katy Huberty recently suggested that if a 25% tariff is imposed on Apple's smartphones, the price of the iPhone XR would rise by $160
. Don't be fooled by tweets sent out by President Donald Trump. China does not pay the U.S. any money because of the tariffs. Actually, the additional tax is paid by American importers and consumers.
While no Apple devices are currently the subject of these tariffs, according to The Verge
, accessories like adapters, chargers, cables and cords h taave been taxed at 10% since September. Now, the import taxes on these accessories go up to 25%. Besides those accessories, the very same thing applies to Apple's iPhone cases and the leather cases for Apple's iPad tablets. Apple has eaten the cost of the additional taxes on these accessories measning that U.S. consumers saw no hike in the prices of these items. But we can't expect the company to do this forever.
You might be asking yourself, isn't Apple an American company? Why should its products be subject to an import tax?
Yes, Apple is an American company and if you're wondering why its accessories are lumped in with a group of products imported from China, the answer is quite simple. While Apple designs these items in the U.S., it has them assembled in China. President Trump has often told Apple and other U.S. companies that if they want to avoid tariffs, they need to move their production to the states. Apple CEO Tim Cook, who has had the opportunity to speak with the president several times, has warned Trump that a trade war with China is not a good idea. At one of those meetings, Cook was reportedly promised by the president that the U.S. government would not impose tariffs on the iPhone
, although others in the administration denied that the promise was ever made.
Some Apple iPhone accessories, like cases, adapters, chargers, cables and cords are being taxed at 25%
So why are the U.S. and China embroiled in this trade war? It all goes back to the trade deficit. For decades, the value of Chinese goods imported into the states has exceeded the value of American products imported into China. The is due to a couple of things; one, U.S. consumers have more money to spend on imports than their Chinese counterparts. And two, the cost of assembling products in China is a lot cheaper than it is in the U.S. The president sees this as some kind of scoreboard that in his opinion, shows the U.S. losing to China. The U.S. and China have been unable to come to an agreement on trade.
The other side of the trade war is that it weakens the Chinese economy. From December through March, Apple averaged a 66% decline in iPhone shipments each of those months. In April, the decline was narrowed sharply to 3%, indicating a possible turnaround for Apple
in the country. Overall phone shipments in China rose 6% in April after declining in 9 out of the previous 10 months.