Trump says he might exempt Apple from having to pay tariffs

In an attempt to reduce the U.S. trade deficit with China, President Trump initiated a trade war with the country using tariffs as his favored weapon. There is a problem with that. You see, tariffs are nothing more than an import tax that U.S. corporations and consumers pay. And while the president has tried to spin this with tweets incorrectly stating that the tariffs are forcing the Chinese to pay the U.S. Treasury millions of dollars, that is far from the truth. Companies that have their products built in China and shipped to the states, like Apple, are affected.

Products like the Apple Watch, the wireless Bluetooth AirPods, and iPhone parts including battery and smart battery cases are among the products that Apple is paying import tax on. Just like any company in this situation, Apple can pay all of the tax, some of it, or none of it. But any taxes not paid by Apple would be passed along to consumers in the form of higher retail prices. Not one penny of the money generated by the tariffs comes from China. And starting on December 15th, 15% tariffs on the iPhone are scheduled to begin. Originally, smartphones from China were supposed to be taxed in September, but the president pushed it back to December so as not to force Americans to pay higher prices during the holiday season. What is interesting here is that the president says on one hand that China pays the tariffs, but he pushes back the imposition of tariffs on the iPhone to help U.S. consumers avoid higher prices during the holiday shopping season. But that is another story for another day.

Today's story, as reported on by Reuters, revolves around a tour that the president took of Apple's Austin, Texas plant along with Apple CEO Tim Cook. The facility assembles the company's Mac Pro desktop computers. By producing the product in the U.S., Apple avoids having to pay the import tax on the device. President Trump has told Apple in the past that Apple could avoid paying tariffs altogether by building factories in the states. The president, responding to a question from a reporter following the tour, said that the U.S. is looking at exempting Apple from the tariffs on Chinese imports. "We’re looking at that," Trump said. The president added, "The problem we have is you have Samsung. It’s a great company but it’s a competitor of Apple, and it’s not fair if, because we have a trade deal with Korea - we made a great trade deal with South Korea - but we have to treat Apple on a somewhat similar basis as we treat Samsung."

Earlier today Apple announced that it has started construction on a new plant in Austin that will open in two years. It will start with 5,000 employees and at full capacity, it will employ three times that amount. The president is sure to consider this good news since bringing back jobs lost overseas was one of his campaign promises.

Cook and Trump appear to have a good relationship even though there have been times when Trump has gone off on Apple. For example, in February 2016, then-candidate Trump called for a boycott of Apple products after the company refused to turn over code to the FBI that would allow them to unlock a terrorist's iPhone 5c. At the time, Trump said, "I use both iPhone and Samsung. If Apple doesn’t give info to authorities on the terrorists I’ll only be using Samsung until they give info." While the FBI ended up having to pay a third-party company to unlock the phone, President Trump solely relies on a pair of iPhones. And just this past August, Apple's shares plunged over 10% in one day when the president disseminated a tweet ordering U.S. companies to stop doing business with China. That never happened of course, and it isn't clear whether he can legally demand that the American firms refrain from doing business in the country.

While Apple is reportedly looking at moving as much as 30% of its production out of China, it would appear that countries like Vietnam, India (where Apple does produce iPhones for domestic consumption), Mexico, Indonesia, and Malaysia are being considered.