Apple Can Avoid Tariffs by Shifting Production to US

People visit an Apple store in Istanbul, Turkey August 15, 2018.

Apple has written a letter to the Trump administration, saying the proposed $200 billion tariffs on China-made products will make the Apple Watch, AirPods headphones, HomePod smart speaker, Macs and key computer parts more expensive.

But businesses warn there are other ways China can strike back, through regulations and other administrative means. It brought in about $6.1 billion in revenue past year, according to an estimate from analyst firm Bernstein.

In addition, the tariffs will also raise the costs to run Apple's manufacturing and product fix facilities in the USA by placing duties on logic boards, microprocessing units, and other electronic equipment, the company said.

Trump said on Friday he's willing to slap tariffs on an additional $267 billion in Chinese goods, on top of duties of $200 billion in imports is already considering. And I hate to say this but, behind that, there's another US$267 billion ready to go on short notice, if I want.

The hearings examining the potential impact of the taxes wrapped up on Thursday, setting expectations that another round of tariffs could be imposed on $200bn (£154.7bn) of Chinese products as early as Friday. Apple said "it is hard to see" how tariffs would advance the government's goal. The White House did not reply to a request for comment.

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Apple generated $9.6 billion in sales in China in the fiscal third quarter, accounting for 18 percent of its total revenue in the period. In its most recent quarter, Apple's sales were $53.3 billion with earnings of $11.5 billion and reported $243 billion cash.

Apple did say its MacMini, a low-cost computer that comes without a keyboard or mouse, would be affected.

It was unclear what those tariffs would cover. By close the dip had eased to 0.81 percent. The administration has asserted that Trump's tariffs would force China to trade on more favorable terms with the United States. The company said that "main logic boards with microprocessing units" could face levies, along with equipment used for research and development.

CEO Tim Cook said in July that those measures had no effect on Apple. On Twitter, Trade lawyer Scott Lincicome pointed out that an iPhone would be more expensive to manufacture here in the U.S., citing a Marketplace report from 2014 that suggested that the component cost of an iPhone in China was around $190 per phone.

The company is highly exposed to a trade war between the USA and China.

"Moreover, because China accounts for such a large percentage of imports for consumption or further manufacturing, any additional tariffs would likely translate into added costs and price increases in the United States".

(Copyright © 2015. All Rights Reserved.)
 
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