Apple lifted by delay in U.S. tariffs on China
- Apple shares rose Tuesday after the Trump administration said it is postponing tariffs on cell phones, laptops and other gadgets made in China and imported to the U.S.
- The delay temporarily removes a “dark cloud” over Apple, one analyst said, especially with the company set to introduce its latest iPhone models in September.
Apple may be the biggest beneficiary of the Trump administration’s move to retrench in its ongoing trade war with China. The decision means the technology titan will temporarily avoid a 10% tariff on iPhones and other devices assembled in China by the company’s long-time manufacturer on the mainland, Foxconn.
The Office of the U.S. Trade Represented on Tuesday announced that some tariffs President Donald Trump had threatened to impose on Chinese imports, including cell phones, laptops, game consoles and other electronics,. They had been scheduled to take effect Sept. 1.
Apple designs its products in the U.S. but assembles many of them, particularly the iPhone, in China. Investor relief at the cease-fire sent shares of the company up more than 4% on the day, which benchmark stock indexes also jumped.
Tariffs are paid by U.S. importers, not China, as Mr. Trump has repeatedly claimed. Investors were nervous that retailers like Apple would pass the added cost of their Chinese-made products on to consumers, potentially dampening sales for both the important “back to school” and holiday shopping seasons.
For Apple, the tariff also would have taken effect just as the company is planning to release its latest batch of iPhones in September. The delay removes a “ ” over Apple, Wedbush analyst Daniel Ives said in a note to investors.
If the U.S. does eventually slap a 10% tariff on China for gadgets later this year, Ives thinks Apple is likely to eat the cost rather than raise iPhone prices. But the levy, if it takes effect in mid-December, could hurt Apple at a time it is counting on consumers to upgrade to its latest phones.
Prices for Apple’s iPhone XS Max starts at $1,099 (if the device is purchased without a trade-in), so a 10% tariff passed onto the consumer would mean a roughly $110 spike.
Most analysts expect an incremental upgrade to the iPhone next month, with bigger leaps in technology not coming until 2020, according to CNET.
Recent reports suggest Apple had been exploring moving some of its production out of China to help cushion the cost of potential future tariffs. But that’s easier said than done.
It can take months, or even years, for a big company to shift its manufacturing from one country to another, especially for companies like Apple with the kind of intricate supply chains needed to support a global business. Moving just 5% to 7% of iPhone production to India, for instance, would take up to 18 months in a “best-case scenario,” Ives previously estimated.