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Apple Says China Trade War and Tariffs Will Boost Product Prices

One of the world’s few trillion dollar companies had some troubling news regarding President Donald Trump’s proposed tariffs. President Trump’s proposed tariffs on $200 billion worth of products imported from China. As a result, Apple (:AAPL) has announced that some of their most popular consumer goods will see an increase in price. These products include the Apple Watch and AirPods headphones.

Additionally, several other consumer products will require a price hike in response to the tariffs imposed by the U.S. government. The HomePod speaker, some Beats speakers, AirPort and Time Capsule internet routers, the Magic Mouse and Magic Trackpad, and leather cases for the iPhone, iPad, and MacBook, the Mac mini desktop, Apple Pencil, and various chargers and adapters will be affected.

President Trump responded to Apple’s announcement on Twitter. Trump wrote, “Make your products in the United States instead of China. Start building new plants now. Exciting!”

The U.S. has imposed $50 billion worth of tariffs on Chinese goods with another $200 billion in the final stages. The public had until Thursday to comment on the administration’s plan. Trump said Friday he is considering another $267 billion of tariffs on China, which analysts said will affect virtually every category of consumer goods, to retaliate against what he calls “unfair trade practices”.

Apple detailed how the company’s operations and products will be affected by the tariffs. As a result of the news, the company’s shares fell 0.8 percent on Friday to close at $221.30.

The company stated that the tariffs would “show up as a tax on U.S. consumers” and “increase the cost of Apple products that our customers have come to rely on in their daily lives.” Apple Chief Executive Officer Tim Cook earlier this year told Trump tariffs “were not the right approach.”

Apple, in a defiant response to the tariff proposal, said it bought more than $50 billion worth of components from U.S.-based suppliers last year. Apple also added that it’s the largest U.S. corporate tax payer and that every Apple product “contains parts or materials from the United States and is made with equipment from U.S.-based suppliers.” Earlier this year, the company said that as part of tax reform it would spend $350 billion in the U.S. over the next five years.

Apple generated $9.6 billion in sales in China in the fiscal third quarter, accounting for 18 percent of its total revenue in the period. How these tariffs will affect the price hike of products and then affect consumer demand is an unknown. However, speculation from top executives seem to agree the tariffs will demonstrate negative externalities that will permeate throughout the entire country.

 

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