Apple products won’t be even more expensive this year thanks to President Trump’s trade deal with China. This trade deal with China means that Apple products will not be taxed an extra 15%, an amount that would see an increase in iPhone prices by $150. In the case that the trade agreement fell through, Apple would have had to either raise the cost of an iPhone and other major products or eat the price, negatively impacting their profit. Apple and its investors can rest easy for the time being, but will continue to make efforts to have manufacturing in other countries such as India and Vietnam.
US-China Trade War Relations
This near-miss for tech companies like Apple that manufacture their products in China is not the first. Since the beginning of his presidency, President Trump has made waves between the two giant economies. His aim is to relieve the US from making trade with other countries, mainly China, so the US can grow its economy by using its own resources. Both countries have been calling each other’s bluffs with various attempts to raise taxes higher and higher ultimately affecting the finances of companies and consumers.
Apple Treading Water
As one of the highest-profile companies affecting by this trade war, Apple has its hands full trying to relocate manufacturing and convince President Trump to make trade deals in their favor. The company is in the process of building manufacturing facilities in other countries, but this can take years. The established supply chain between American companies and Chinese manufacturers is also hard to transplant to other countries with the intricate design of Apple products parts.
Throughout the trade war, Apple has been eating the higher taxes to keep their products affordable, but in the long-term, this can greatly impact their revenue. Delaying production is not an option either as consumers will be more likely to hold onto their current Apple products longer instead of buying the new models as they come out.
Apple’s competitors are further away from a crisis since they produce elsewhere or have other markets to fall back on. For example, Samsung products are assembled in Vietnam and LG can rely on its Asian or European markets. Other tech items like PCs have broader supply chains and have options outside of China. Overall, foreign companies that don’t depend on US sales have less to lose.
Perhaps the waves will settle between the US and China and iPhone prices can stay the same. But it’s hard to predict what will happen in the near future. Some companies can avoid price increases in the short term by manufacturing in China and then finding other means of production. The fate of production in China rests to the whim of President Trump whose slogan, Make America Great Again, heavily implies his goal to keep money in America. The increase in iPhone prices is the most obvious result of the volatile trade deals, but it extends to the Americans of the agricultural and industrial sectors have already seen the brunt of raised tariffs.