As the Trump administration announced plans to widen the net on its tariffs on Chinese imports, China has threatened retaliatory action which could prove ‘fairly devastating’ to Apple – hitting iPhones as well as other devices …
The WSJ reports that it is now not just Apple products which could be hit by import tariffs, but also the materials Apple needs to make its iPhones.
Because Apple assembles almost all of its gadgets in China, its watches, AirPods and other devices are vulnerable to the Trump administration’s plans to widen the scope of tariffs on Chinese imports—a risk Apple warned about earlier this month.
That reliance also could make the iPhone and other devices vulnerable if Chinese officials follow through on retaliatory moves to restrict sales of materials, equipment and parts key to U.S. manufacturers—measures The Wall Street Journal on Sunday reported that Beijing is considering.
The timing of the countries’ new measures could be especially bad for Apple, which this week starts shipping two of its three new iPhones and a new smartwatch. Those new devices are expected to help fuel the company’s sales in the final three months of the year, when Christmas shopping helps deliver about a third of Apple’s annual revenue.
Moor Insights analyst Mark Vena said that this could be serious.
China’s threatened retaliatory moves in particular “could be fairly devastating,” said Mark Vena, an analyst with Moor Insights & Strategy, a technology research firm. He said Apple should have enough inventory of key components for iPhones and smartwatches to maintain production through the holidays, but long term, Chinese retaliation “could be a serious problem.”
Apple already faces a 10% tariff on Apple Watches sold in the USA, as they would be taxed as they enter the country from China. If the company absorbs this cost, then it hurts Apple’s margins. If it passes the cost onto consumers, it potentially hurts sales. One analyst has estimated that the previous round of tariffs could reduce Apple revenues by 5%, while the latest proposals would bite much deeper.
Business leaders, including Tim Cook, have repeatedly warned Trump that a trade war with China will harm the US economy.