US again threatens a 25% tariff on Apple’s iPhones
The current US president has once again threatened to apply a 25% tariff on iPhones sold in the US if they are made outside the nation, even though there are no manufacturing facilities in place in America with which to make the devices and building out to make them would take years.
Something may be missing
“I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else. If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S. Thank you for your attention to this matter!” wrote the elected us boss on social media.
The threat almost certainly applies against any phones made outside of the country, which in one step threatens to undermine digital transformation there, causing shockwaves across US enterprise and driving consumer prices higher.
It takes time to tango
Apple has been attempting to diversify its manufacturing for years and is currently working to make all US iPhones in India. That’s not good enough for the president T, who wants all iPhones made there, which is of course impossible.
Trump also threw stones at the EU, recommending a 50% tariff on European Union imports from June 1, which will impact Europe while driving US prices higher.
Caught between a rock and a hard place, what should Apple do?
Not everyone thinks Apple should move production to the US, even if it were possible to do so.
Apple analyst, Ming Chi-Kuo puts it this way: “In terms of profitability, it’s way better for Apple to take the hit of a 25% tariff on iPhones sold in the US market than to move iPhone assembly lines back to US.”
Doing the maths
That’s assuming the tariff stayed the same, in the event the president increased the tariff that may no longer be true, but given that the US benefits from Apple’s success in terms of tax revenue, employment, and the success of the wider digital ecosystem, it’s arguable that the strategy itself is doomed to fail.
What makes the whole story so silly is that we do already know that even if Apple were to choose to begin making iPhones in the US, transitioning manufacturing there would take years, not weeks, as it is no simple thing to build a factory capable of churning these devices out.
That’s even before you stop to consider component and raw material supply lines and the need to recruit skilled labour. It is actually pretty hard to determine the advantage consumers would have paying more for devices made in factories by robots, even if it did generate two American jobs.
Naturally, Apple an EU stocks fell on the news, even as the dollar became weaker and shortages are just about to impact US shops.
Will good sense prevail? It’s not looking likely.
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