According to the news report by Bloomberg, US President Donald Trump has suggested that a 10% tariff be placed on phones and laptops that have been made in China.
Apple Inc., which has already lost one-fifth of its value since the beginning of October thanks to a technology rout in the stock market, will be one of the companies that will take a major hit if this tariff plan materializes.
The tech giant is already going through a rough time, with reports coming in that its suppliers are cutting their forecasts, an indication that the new range of recently launched iPhones are not selling as well as the company had anticipated.
And now, President Trump’s comments to the Wall Street Journal that he was contemplating including the iPhone, Apple’s signature product, in his next round of tariffs on goods imported from China. This would be a big blow for the company’s Chief Executive Officer Tim Cook.
Donald Trump said that if he put the tariffs at 10%, then that was something that consumers would be able to handle easily. Apple share prices fell by 1.6% after the news of Trump’s possible intentions was made public.
A few analysts felt that the President’s comment could shake investors. Consumers are already price sensitive, especially considering the fact that current average price of an iPhone is already in the $800 region.
According to Wedbush Securities analyst Daniel Ives, the last things that Apple and its investors need at this point in time is another set of tariffs imposed on iPhones. This would impact demand drivers are a very crucial juncture for the company in terms of its growth.
Currently in the US, the price of an iPhone ranges from $499 to $1,499. This includes the older models such as the iPhone 7 that the company still sells.
Apple’s suppliers’ shares are also down. The biggest assembler of iPhones, Hon Hai Precision Industry Co., saw its stock slip 1% in Tuesday’s trading in Taiwan. For the entire year so far, the company has lost 40% of its value.
Another Apple supplier that also supplies parts to other technology companies, Inventec Corp., saw its share price drop by 4.3% to its lowest level in over a year.
So far, Apple’s main as well as most lucrative products – the iPhone and the iPad – have escaped tariff impositions. The company had stated earlier in the year that its other products, such as the Apple Watch and the AirPods would be affected by the trade war before the US had stated that it would not be imposing tariffs on such items.
Despite that Apple had warned in September that it was expecting products such as the Apple Pencil stylus, the Mac Mini as well as cables and cases could be impacted by tariffs.
Apple had moved a small part of its manufacturing operations to Brazil and India in an effort to avoid local taxes on imported products. Trump has insisted on several occasions that the tech giant should start manufacturing its products in the US.
Earlier, Cook used to justify the manufacturing of Apple’s iPhones in China by saying that the skill sets in that country were more conducive to making their products. However, in recent years, the CEO of Apple has altered his stance, saying in an interview this year that it wasn’t true that iPhones were not being made in the US.
However, currently some components such as the glass covers used on these smartphones are being made in the US and then shipped to China for assembly.