Trump tweets out an order to U.S. companies that could devastate Apple

Trump tweets out an order to U.S. companies that could devastate Apple
Shares of Apple plunged nearly $10 or 4.62% today after U.S. President Donald Trump disseminated a tweet "ordering" U.S. companies to stop doing business in China. While the president is not a dictator and cannot just tweet such an order, the fear is that he will do something within the powers of the president and force U.S. companies to pull out of the country. Apple designs its products in the U.S. but assembles them mostly in China.

CNBC is now reporting that the president has raised tariffs on $250 billion worth of Chinese imports to 30% from 25% starting on October 1st. And the tariffs on another $300 billion of goods that takes effect on September 1st will now be 15% instead of the originally announced 10%. The Apple AirPods and the Apple Watch are included in the latter group. Originally, the Apple iPhone and other smartphones from China were also part of this tier of products, but Trump is holding off taxing these products until December 15th so that the extra tax doesn't affect holiday sales of smartphones and some other electronic devices.

While Trump has been worrying about an indicator called the inverted yield curve that has a great record at forecasting recessions (I'd be happy to explain this in the comments section if anyone wants to know), what he doesn't realize is that hiking the tariffs are going to cause more damage to the U.S. economy. The tariffs are nothing more than an import tax that U.S. companies pay when importing the targeted goods from China. These firms can either eat the additional costs themselves and hurt their profit margins, or pass all or part of the tax along to consumers in the form of higher prices. Apple has been eating the tax imposed on imports of certain iPhone and iPad cases in order to keep the price to U.S. consumers unchanged. But it isn't clear what the company will do with the extremely popular Apple Watch and AirPods. New versions of both could be unveiled on September 10th.

U.S. companies and consumers are the ones hurt the most by the tariffs imposed by Trump

Back in June, reports started surfacing that Apple was investigating moving production of its devices out of China. While the company had produced older iPhone models in India to avoid an import tax in that country, and to meet the demand for lower-priced models in that market, it has started production of the 2018 iPhones in India. However, the facilities in the country are not close to being enough to meet Apple's needs. And any move out of China could take years to complete. A new supply chain would need to be found, and new workers would have to be properly trained. Apple could end up moving as much as 30% of its production to a country like Vietnam.

What set off this trade war is the large U.S. trade deficit with China. Most economists will tell you that this merely means that American consumers are wealthier than their Chinese counterparts and can afford to buy more goods from China than they buy from the U.S. However, President Trump has considered the deficit to be a scoreboard indicating that the U.S. was losing some sort of trade game with China. In May, he lied by posting a tweet stating that because of the tariffs, millions of dollars were flowing into the U.S. Treasury from China. Any money flowing into the Treasury from the tariffs is from U.S. companies like Apple.

A number of times, Trump has told Apple that to avoid tariffs, the company should move production of its devices to the U.S. And earlier this week the president met with Apple CEO Tim Cook. During the meeting, Cook told Trump that the tariffs are giving Apple's top rival in the smartphone industry an unfair pricing advantage. That's because Samsung's phones imported to the U.S. from South Korea currently do not face any import tax in the states. And this is the problem with the U.S.-China trade war; the tariffs imposed by Trump are hurting U.S. companies like Apple more than they are affecting the Chinese. This is similar in some respects to the Huawei export ban. Sure, it will eventually be a nuisance to Huawei, but U.S. tech firms like Qualcomm, Intel and Micron will miss out on the $11 billion in supplies that Huawei bought from the U.S. in 2018.



40. gadgetpower

Posts: 333; Member since: Aug 23, 2019

This is sad.

38. mahalo15

Posts: 84; Member since: Nov 30, 2018

This Alan guy clearly doesn't understand economics. For US, its short -term pain but long-term gain. Real purpose of tariffs is to bring China to the negotiating table in regards to state sponsored IP theft and unfair trade policies (forcing foreign firms to do joint ventures with local companies and handing over trade secrets, propping state run companies with subsidies and cheap loans with liberal repayment terms) . We are already seeing foreign firms leaving China at record pace for Vietnam, Indonesia, Taiwan and India. Yes, American consumer might feel short-term pain while these companies move production. But who's going to lose in the long-term, China. State run media might paint a rosy picture but they are already feeling the pain. Would be interesting to see how things pan out by next year. Its time for smaller South Asian nations to reap the rewards.

47. jiangqiushi

Posts: 44; Member since: May 28, 2019

Well, trump hasn't won yet, we will see who's winning at the end. So "long term gain" is still a wish.

35. darkkjedii

Posts: 31805; Member since: Feb 05, 2011


29. hiepthong

Posts: 7; Member since: Nov 30, 2016

Phonearea is talking about economics. Lol. Go back to topic which you are good at!

22. miketer

Posts: 548; Member since: Apr 02, 2015

Hello Alan, what's an inverted field curve?

30. hiepthong

Posts: 7; Member since: Nov 30, 2016

Yeah. Feel like i am reading cnn!

34. Alan01

Posts: 668; Member since: Mar 21, 2012

When you look at the normal returns from Treasury Bonds (considered among the safest investments in the world), the longer the length of the bond, the higher the yield. That is to cover the risk of inflation. So the 2 year Treasury Bond currently yields 1.53 and the 10-year bond might normally have a higher yield-say 1.65%. But recently the shorter length bond yield was paying slightly more than the longer-dated bond. That is an inverted yield curve. It means that the economy is slowing so much that the risk of inflation will be lower in the future. It has been a very good "predictor" of an upcoming recession. Regards, Alan

16. all4dom

Posts: 23; Member since: Sep 30, 2013

These companies should have moved out a long time ago. China has had its eyes focused on us for a long time & they look at America as a declining nation. They so.not like our values & they hate freedom. What's funny is these tech companies act like they are holier then though but in the end they would sell out their mother for a buck.

15. jeff327

Posts: 87; Member since: Feb 28, 2012

The title to this story is ridiculous. Trump's Tweet is meaningless. He cannot force any US company to do business outside China.

14. iczer

Posts: 161; Member since: Oct 14, 2015

It's very simple, american companies will have to move their production to other countries!

12. tedkord

Posts: 17529; Member since: Jun 17, 2009

Such a moron.

9. User123456789 unregistered

Apple should have own factories like other brands do.

26. vgking9699

Posts: 244; Member since: Mar 01, 2019

Actually most don’t, Samsung themselves also using a lot of the same Chinese workers to build their parts Apple is far from the only company that works this way, everyone does actually

44. hiepthong

Posts: 7; Member since: Nov 30, 2016

False information. Samsung is move away from china. They only have 1 factory in china now and theu are closing it as well this year

5. bigstrudel

Posts: 621; Member since: Aug 20, 2012

Fake news. He didn’t “Order” anyone to do anything. The narrative that tarriffs have hurt consumers is false there have been dozens of stories and studies showing that corporations are eating the tariff costs due to price competition in our completely healthy capitalist market. The US had only tariffs for tax funding until the 1900’s came around and a central US bank was established to scam the public. We were paying 0% tax at that time because tariffs work. Keep being ignorant though folks. Maybe stick to tech stories.

6. Gottaluvnewtech28

Posts: 18; Member since: Apr 20, 2019

This right here. It amazing how many people forget this US funded everything thru tarriffs before the progressive idea of the "income tax" was introduced.

28. TheOracle1

Posts: 2340; Member since: May 04, 2015

Ignorance is bliss. You're probably one of those that hate Obamacare but like the Affordable Care Act. You probably also think it's a good idea to cut welfare programs since minorities abuse the system, when in fact Republican states have the highest number of welfare recipients. Tariffs are a tax Einstein. Educate yourself before posting The Trump type garbage.

37. Gottaluvnewtech28

Posts: 18; Member since: Apr 20, 2019

Obamacare/ACA is garbage and if you don't know that by now there's no saving you. Cut welfare no, reduce entitlements absolutely. Last year the largest state spending for welfare overall, California. The largest spending state per capita for welfare, New York. What do these states have in common? They are DEEPLY BLUE. Why is that I wonder? Is it because they have the highest INCOME TAX rates in the country and it's ridiculously hard to live there? Probably, cause it sure ain't those pesky Republicans running those states into the ground. Those two states also happen to have the worst homeless problem in the country. I live in California and because of exorbitant taxes our gas prices are the highest in the nation because they have to tax the s**t out of us in order to keep up with all that welfare spending. The progressives leftists in this state have been ruining it for decades, so spare me your Bernie bro type garbage.

13. Fred3

Posts: 622; Member since: Jan 16, 2018

I'd like to have whatever you're then again, probably not

36. Gottaluvnewtech28

Posts: 18; Member since: Apr 20, 2019


17. jellmoo

Posts: 2699; Member since: Oct 31, 2011

He most certainly did order it. His exact words: " Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing......your companies HOME and making your products in the USA." And yes, tariffs have a direct impact on consumers. Strangely enough, the economy of the 19th century is vastly different than the economy of the 21st century.

43. Macready

Posts: 1832; Member since: Dec 08, 2014

Smoking the good stuff there. Companies are partially swallowing, but have admitted to forced price adjustments too. Fact #1. Companies have said that they have reached the limits of swallowing and tarrifs are still going up based on current information. Only one way to leverage: consumer. Fact #2. The first real casualties are here though. Investments (halted or down) due to uncertainty. Consumer trust (down) due to the former. Those are 2 major preludes to a forcefully induced recession. Swallow it while it's "working" . Welcome to the reality of the 21st century. I hope you had a good nap those last 100+ years.

4. cmdacos

Posts: 4421; Member since: Nov 01, 2016

'While the president is not a dictator and cannot just tweet such an order' He's not?

3. bucknassty

Posts: 1420; Member since: Mar 24, 2017

trump dont care

7. Krazyass69

Posts: 60; Member since: Feb 09, 2019

He cares to the american people by forcing american companies to give jobs to the americans rather than the chinese


Posts: 167; Member since: Aug 06, 2017

Americans wont be getting the jobs for long. The tariffs will make every day goods more expensive, which will lead to the average citizen spending less money. In the end, the companies will make less money and fire people to keep profits up. And what about small businesses? A lot will be forced to close because their operating costs will go up due to having to spend more money due to tariffs. Theyll have to up their prices too, which will lead to less business, and ultimately shutting down.

32. wrm2013

Posts: 237; Member since: Mar 28, 2013

Perhaps things are to cheap. Perhaps the Chinese deliberately set prices so low for the purpose of your argument.

10. User123456789 unregistered

It does not mean factory would have american employees. Someone can easily hire people from Central America.

11. tedkord

Posts: 17529; Member since: Jun 17, 2009

Trump cares about Trump. Period.

* Some comments have been hidden, because they don't meet the discussions rules.

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