According to a report in Monday's New York Times, in the midst of the escalating trade war rhetoric between the U.S. and China, Apple CEO Tim Cook has allegedly been given a promise from the Trump administration that the Apple iPhone, assembled in China, will not be slapped with any tariffs for its trip across the U.S. border. The administration has identified $200 billion in Chinese exports it plans to add tariffs to, on top of the original $50 billion in products it first decided to go after. If the reports are true, the iPhone will not be among those products.
Despite the promise by the U.S. to leave assembled iPhone units alone, Apple is concerned that the Chinese could retaliate against the U.S. company. Three people close to Apple, who remained anonymous because they are not authorized to speak for the company, say that the tech giant's top worry is that the Chinese wreak havoc with Apple's supply chain by forcing suppliers to provide pointless paperwork in order to gum up the works. The sources say that China could play the "national security" card to prevent Apple's contract manufacturers like Foxconn from receiving the constant flow of parts needed to keep iPhone assembly lines running smoothly.
Apple is also concerned that the Chinese government will point to the way that Huawei has been accused of being a threat to U.S. national security, and take some type of action against Apple. The world's third largest smartphone manufacturer, Huawei has longed for its phones to be featured on the shelves of major U.S. carriers. Earlier this year, both Verizon and AT&T planned to sell the Huawei Mate 10 Pro
, a well-spec'd top-shelf model. But all of a sudden, both carriers backed off
amid speculation that someone from Washington whispered in their ears and told them not to carry the device.
In a meeting at the White House last month with the president and his top economic advisor Lawrence Kudlow, Cook told the pair that tariffs placed on Chinese imports were like a tax on U.S. consumers. Cook also said that the trade deficit with China is overstated due to flaws in the way it is calculated. But it appears that Trump and Kudlow were more interested in Cook's promise that Apple will contribute $350 billion to the U.S. economy over the next five years. For that to happen though, it is important that the iPhone be allowed to cross the U.S. and China borders unfettered by tariffs.
With support from the Trump administration in the U.S., the question is whether China will also keep its hands off the iPhone. When you consider the number of jobs that Apple is responsible for in the country, and how highly the iPhone is thought of in China, we'd expect the device to be kept out of the trade war by China, too.