Apple iPhone faces 15% U.S. import tax starting this Sunday

Apple iPhone faces 15% U.S. import tax starting this Sunday
Next Sunday, December 15th, another tier of Chinese goods will face a 15% U.S. import tax including the Apple iPhone. First, we need to clear up something. The tariffs imposed by President Donald Trump are merely an import tax and despite what the president claims, China is not paying millions to the U.S. because of them. In fact, the total amount of money that China has handed over to the U.S. Treasury because of the tariffs is $0. That is because American companies and consumers pay the tariffs.

Let's use Apple as an example. The company designs its products in the U.S. and manufacturers the majority of them in China; as a result, when these devices are shipped into the U.S., they are taxed by the U.S. government. Apple then can decide to pay all or part of the tax. So far, it has eaten the cost of the tariffs on products like the Apple Watch. That cuts its profit margins on affected products. Other companies have decided to pass some or all of the additional cost on to its customers in the form of higher prices. 

Analyst says that Apple has the most to lose or gain depending on whether the next tier of tariffs takes effect next week


The iPhone and the other products facing the December 15th deadline were originally supposed to have been taxed starting in September, but the president pushed the start date back to December so that the U.S. economy would not face disruptions from higher prices during the holiday shopping season. Today, securities firm Wedbush told clients (via SeekingAlpha) that Apple has the most to lose or gain depending on whether the 15% tariffs go forward on December 15th as planned.

Analyst Dan Ives says that 40% of iPhone units sold globally are shipped from the states. If the tariffs do go into effect on December 15th, Ives says that it will result in a 4% hit to Apple's fiscal 2020 earnings per share figure. "To this point, the first and major question on the minds of investors is around if Apple will fully absorb this tariff from iPhones and other hardware (Macs, iPads, AirPods) produced from its flagship Foxconn factory in China if this tariff situation heads into 2020, or instead directly pass the incremental costs to consumers which will modestly dent demand in the US," Ives wrote.


China hopes that there still is time to reach a trade agreement with the U.S. before the next tier of tariffs goes into effect. According to Reuters, China's Assistant Commerce Minister Ren Hongbin said today, "On the question of China-U.S. trade talks and negotiations, we wish that both sides can, on the foundation of equality and mutual respect, push forward negotiations, and in consideration of each others' core interests, reach an agreement that satisfies all sides as soon as possible." The two countries  are negotiating "phase one" of a deal that would stop both sides from ramping up tariffs and other trade restrictions. The U.S. wants China to commit to purchases of American agricultural products, and agree to follow certain rules on intellectual property and currency. The U.S. also would like China to open up its financial markets. The Chinese are asking the U.S. to remove tariffs previously imposed on $375 million of goods and cancel the tariffs on $156 million of Chinese exports scheduled to begin on December 15th.

White House economic adviser Lawrence Kudlow said last week that while both sides are communicating daily, there are no plans yet for face-to-face talks. Last week, President Trump said, "We’ll have to see, but right now we’re moving along. On December 15th, something could happen, but we are not discussing that yet. We are having very good discussions with China, however." In other words, the situation is fluid and anything might happen before next Sunday arrives.

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14 Comments

1. MsPooks

Posts: 311; Member since: Jul 08, 2019

People are already more than willing to pay the current "Apple tax." Does anybody really think another $150 is going to hurt sales? Apple should absolutely pass it on to consumers. If they want to avoid the issue in the future, they should move production elsewhere, like India or Vietnam; anywhere they can take advantage of 3rd-worlders. Oh, wait....

4. shm224

Posts: 317; Member since: Mar 19, 2015

It's not $150. Apple pays only about $200-$300 whole sale price for iPhones. 15% of that amounts to only $30-$45 per unit in tariff, or that's only about -4% in their profit, as Dan Ives in the article correctly points out. Second, Apple users are contrary to popular belief price-sensitive. Third, Apple does not want to move their production out of China.

8. sgodsell

Posts: 7621; Member since: Mar 16, 2013

If they could move it out Apple and any other US company would love to get out of China. At one point it was a major benefit. Now with prices rising across the board, and tariffs. Now it's not worth it. Apple even said they are looking to move some of the manufacturing out of China. Other companies are looking to do the same. Apple greed has caught up to them. Chinas greed will come back to bite them as well.

2. Whitedot

Posts: 894; Member since: Sep 26, 2017

So Tim didn't convince Trump get him a free tax pass after all?

3. Alan01

Posts: 662; Member since: Mar 21, 2012

Tim is not the Apple of Trump's eyes.

7. darkkjedii

Posts: 31765; Member since: Feb 05, 2011

Lol, good one.

5. shm224

Posts: 317; Member since: Mar 19, 2015

another stupid article: " the total amount of money that China has handed over to the U.S. Treasury because of the tariffs is $0. " The total economic opportunity cost suffered by China is much greater than $0. In addition to numerous US companies moving out of China, the last thing China wants now in the midst of rural bank-runs and Hongkong protests is millions of unhappy, jobless youths out on the street. Trump's trade war could the tipping point and could cost China trillions in damage in the end.

11. tedkord

Posts: 17514; Member since: Jun 17, 2009

It's harming the US as much or more than China.

13. blingblingthing

Posts: 986; Member since: Oct 23, 2012

Don't kid yourself. Big time corporations aren't going to be able to quit China cold turkey. China is essentially a global hub of manufacturing. You aren't just going to be able to replicate what you get a China a couple miles down the road. Apple is likely to incur the same cost or greater just moving to another country. What about quality control, what about production volume access to skilled labor force?

14. shm224

Posts: 317; Member since: Mar 19, 2015

Samsung the largest smartphone maker in the word did just that -- the company moved their China operation to Vietnam where average wage is 1/3 of China and where their premium devices are now made. no cold turkey. Trump has been warning against this for a while and Tim Apple, the supply-chain-genius, had plenty of time to respond to that. Apple's iPhones are one single largest source of trade deficit with China and Trump can't balance the trade problem with China without addressing Apple's manufacturing in China.

6. darkkjedii

Posts: 31765; Member since: Feb 05, 2011

That 2020 5G iPhone, is about to cost $2,000.00. The 512 model, $2,399.00.

10. Alcyone

Posts: 615; Member since: May 10, 2018

People would still buy it. Personally, I think anything over 1k for a phone is excessive, in most cases. I'll be just fine with my 50 dollar (old) iphone 8, and avoid the circus that may happen. Gotta thank T mo for the 24 cyber Monday deal, with no trade. Do need that line for my daughter, ironically enough.

9. tbreezy

Posts: 247; Member since: Aug 11, 2019

That's a shame for whoever is concerned about it.

12. mackan84

Posts: 689; Member since: Feb 13, 2014

Just fix it until I update my iPhone 11, iPads or Macs in 3+ years. Hopefully that orange t*rd hasn’t brought on WWIII by then and is history.

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