How Trump's new China tariffs may increase iPhone prices globally
What's the story
President-elect Donald Trump has announced a plan to impose an additional 10% tariff on Chinese imports, effective from the first day of his second term. He made the announcement in a post on his Truth Social platform, where he blamed the "massive" amounts of fentanyl being sent from China to the US for the tariff hike. The move is likely to hurt American companies and consumers more than China or its businesses.
Import tax
Tariffs are taxes paid by companies importing goods
Tariffs imposed by US government are basically import taxes that are paid by American companies importing goods from China, like Apple. Now, if these firms don't absorb the additional costs of paying the import tax, they may increase prices on the affected products. This would mean US consumers would have to pay more for products like iPhones and other tech products imported from China.
Past encounters
Apple's history with tariffs and potential impact on China
During the US-China trade war in Trump's first administration, Apple avoided a 15% tariff on iPhones, which was scheduled for December 15, 2019. However, they paid higher tariffs on some products, such as Apple Watch and AirPods. The only way these tariffs could impact China is if US companies choose to move their business elsewhere due to higher costs.
Strategy shift
Trump's campaign tariff proposal and Apple's production shift
Interestingly, during his campaign, Trump had proposed a 60% tariff on China. The new 10% hike indicates a more calculated approach in his decisions now. In light of these developments, Apple is looking for ways to shift iPhone production out of China and has already ramped up the number of iPhones being manufactured in India. This could be a strategic move to lessen the impact of potential future tariffs.
Trade tension
Trump's proposed tariffs on Canada and Mexico
Apart from China, Trump has also proposed huge tariffs on US's other two biggest trading partners - Canada and Mexico. He plans to impose a 25% tariff on these countries until they take action against drugs, particularly fentanyl, and migrants crossing the border. This move could potentially spark trade wars and seems to violate a free-trade agreement called US-Mexico-Canada Agreement on trade.