United States President Donald Trump announced “Liberation Day” tariffs for basically every country in the world. This decision will be extraordinarily expensive for Apple, as the American phone manufacturer imports its iPhones, which are currently assembled in India or China.
India faced a 26% “discounted” tariff, while China got an even higher 34% rate on top of the 20% from earlier this year. This means that any newly imported iPhone in the United States will be, on average, 40% more expensive. Products from Vietnam would incur a 46% tariff, including iPads and AirPods.
The political rationale behind the tariffs is for the US to wage trade war with other countries; however, in reality, it is either American companies or ordinary citizens who will bear the cost, as that is how tariffs function.
Even if we overlook the aggressiveness of the Trump Administration, the purpose of tariffs is to make foreign products less appealing and encourage local manufacturing of goods.
However, in Apple’s case, such a shift is impossible to happen in the short term. Cupertino is having its chip production to Taiwan, sourcing displays from Samsung in South Korea, and obtaining components from Sony in Japan.
The United States doesn’t make alternatives to any of these products, and relocating production to the US would take years, without any guarantee that a sufficient workforce would be available to meet the demand.
This complex situation resulted in a nearly 8% drop in Apple’s stock. Out of 200 suppliers, 158 have production facilities in China, and key partners such as Goertek, Luxshare, and Lens Technology experienced a 10% decrease in their stock values.
Earlier this year, Tim Cook met with Donald Trump and committed to a $500 billion investment by Apple in the U.S. However, the White House announced that there are no exemptions this Liberation Day, indicating that US citizens should brace for higher prices on goods and services- after all, that’s what they voted for.
