Donald Trump has quietly exempted smartphones from his sweeping trade tariffs in a boost to Apple. The US President wanted his goods levies targeting China to push the tech giant into manufacturing its iPhone in the United States. But doing so would cost the company billions and take years to achieve.
Mr Trump’s 145% tariff rate on Chinese goods had threatened to push up the price of an iPhone for Americans, but under tariff exclusions quietly released on Friday by US Customs and Border Protection the gadgets will be exempt along with laptops, hard drives, chips and processors. Apple has developed a complex supply chain in China since the 1990s. Mr Trump’s talk of tariffs had previously led the company to try and appease him. It announced in February plans to spend £382billion ($500bn) and hire 20,000 people in the US.
The company pledged to fund a data centre in Houston, Texas, for the computer servers needed to power artificial intelligence, but none of the money was tied to making an iPhone in the US.
However, what is not clear is whether this exemption is just a temporary reprieve. The Trump administration could still levy new or different tariffs on electronics at a later date. The president has threatend to apply a tariff to semi-conductors, though he has held off doing so.
Apple’s share price has dropped by 15% and lowered the company’s market value by £382bn ($500bn) since Mr Trump began increasing tariffs on April 2.
The company is widely expected to eventually raise the price of its iPhones and other popular products because its supply chain is so heavily concentrated in China, India and other overseas markets caught in the crossfire of an escalating trade war.
A major question is how long Apple might be willing to maintain its current prices before the toll of tariffs on the company’s profit margins become too much to bear and consumers are asked to shoulder some of the burden.
Apple has yet to discuss its response to Mr Trump’s tariffs on China in public, but the topic may come up on May 1 when the company’s Chief Executive, Tim Cook, is scheduled to take questions from analysts during a conference call to discuss the company’s financial results and strategy.
Asked if Mr Trump believes Apple intends to make iPhones in the US, White House Press Secretary Karoline Levitt pointed to the company’s Houston promise as evidence the firm thinks it can be done.
She said: “If Apple didn’t think the United States could do it, they probably wouldn’t have put up that big chunk of change.”
US Commerce Secretary Howard Lutnick has also predicted tariffs would force a manufacturing shift during an appearance on CBS. He said: “The army of millions and millions of human beings screwing in little screws to make iPhones, that kind of thing is going to come to America.”
But during a 2017 appearance at a conference in China, Mr Cook expressed doubt as to whether the US labour pool had enough workers with the skills needed to do the painstaking and tedious work Mr Lutnick was describing.
Dan Ives, an analyst at Wedbush Securities, said: “The concept of making iPhones in the US is a non-starter.”
He estimated the current $1,000 price tag for an iPhone made in China, or India, would soar to over $3,000 if production shifted to the United States. Mr Ives added: “Price points would move so dramatically, it’s hard to comprehend.”