Apple Warns Trump Administration of Tariff Impact

"We urge the U.S. Government not to impose tariffs on these products."

Evan Niu
Evan Niu, CFA
Jun 20, 2019 at 2:16PM
Technology and Telecom

Rising trade tensions between the U.S. and China has been a major overhang for Apple (NASDAQ:AAPL) shares in recent months, as the escalations expose the company to extraordinary risk across many parts of its business, from pricing and profitability to supply-chain operations. The risks are so great that the Mac maker is reportedly even considering moving 15% to 30% of iPhone production out of the Middle Kingdom -- but those jobs wouldn't be coming to the U.S., contrary to what President Trump may think.

Alongside many other companies, Apple has written a letter to United States Trade Representative (USTR) Robert Lighthizer warning of the impacts.

Woman using MacBook and iPad Pro at a desk in a library with bookshelves in the background

All of Apple's most important products would be affected. Image source: Apple.

"U.S. tariffs on Apple's products would result in a reduction of Apple's U.S. economic contribution."

The Trump administration's proposed China tariffs could climb as high as 25% and impact "all of Apple's major products," the Cupertino tech giant notes. We're talking about the iPhone, MacBook, iPad, iPod Touch, Apple Watch, AirPods, HomePod, Beats, AirPort, Time Capsule, iMac, Apple TV, iPhone repair parts, keyboards, wired headphones and speakers, computer monitors, batteries, and battery cases, according to a list that Apple provided to USTR.

Apple discontinued its AirPort lineup (including Time Capsule) last year, so it's not clear how discontinued products would be affected. The company does not currently offer any first-party computer monitors, but it did recently unveil the Pro Display XDR, which ships later this year.

The company notes that last year it committed to contributing $350 billion to the U.S. economy over the course of five years, and Apple is "pleased to report that we are on track to achieve this contribution." Trump's tariffs "would result in a reduction of Apple's U.S. economic contribution," Apple writes. Note that much of that headline total is purchases from domestic suppliers and manufacturers that the company would be making anyway, while other domestic investments like corporate facilities and data centers may not have materialized without tax reform.

The tariffs would hurt Apple's ability to compete on the global stage. The company notes that it competes with many Chinese and other international rivals in international markets, and many of those competitors do not have strong positions in the U.S. and would therefore be largely unaffected by U.S. tariffs. Hitting all of Apple's major products with more taxes would "tilt the playing field in favor of our global competitors."

Apple has already been struggling in emerging markets, where Chinese rivals like Xiaomi and Huawei have been enjoying considerable success with affordable products. The last thing that the tech titan needs in those markets is more costs.

"We urge the U.S. Government not to impose tariffs on these products," Apple pleads.