President Trump will meet on Friday with Chinese leader Xi Jinping at the G20 Summit in Argentina to discuss the potential 10% import tariffs on Apple products and other devices manufactured in China. Despite proclamations that consumers would “very easily” withstand such price hikes, the threat is another wild shot in the foot by Trump, who is running low on toes to stand on as far as the technology industry is concerned.
It’s another futile attempt to force the factories of Apple, among other hardware manufacturers, onto US soil, just five months after President Trump promised Tim Cook that iPhones would be immune from his Chinese tariffs. “What I’d advise is for them to build factories in the United States to make the product, and they have a lot of other alternatives,” Trump told the Wall Street Journal this week.
By other alternatives, he means boycotting components sourced from China altogether. Arris is one example of a US vendor looking at sourcing components from elsewhere in the long-term, while more immediate moves include harmonizing the supply chain with customers and participants to figure out an effective plan of action, such as rerouting of logistics channels, or the more direct approach of fighting for removal of some critical products from the list.
Trump has threatened to stamp some $267 billion worth of Chinese goods with 25% tariffs, raising the current levy from 10%, in another downright hostile gesture against the country – stemming from national security concerns about Huawei’s close ties to the Chinese government.
The President has warned if negotiations do not result in a favorable outcome for the US, the remainder of Chinese imports not currently subject to duty fees will get an aggressive tariff hike, and he is currently leaning towards rejecting the request from Beijing to hold off, calling it “highly unlikely.” So, the possibility ranges between a low bar of $26.7 billion and high bar of $66.75 billion.
The swipe at Apple is the latest in a spate of import tariffs being imposed by President Trump, covering a long list of machines, their critical sub-assemblies and various component parts, where Chinese companies have established dominant positions as competitive suppliers and so punitive tariffs would be damaging to the US economy.
Set top components and home gateways in particular will take a beating, under list 1 carrying 25% tariffs meaning a critical period for the electronics industry with Arris and Technicolor two companies directly in the crosshairs. Complete set tops are currently exempt from tariffs, so the dangers are not quite so immediate, yet tariffs levied on electronic components will certainly impact the value of the set top industry globally. It also impacts US chipset vendors like Quantenna, who ship a sizable portion of products back to the US. Cisco hiked its prices almost immediately with a 7.8% rise in September on some 2,500 components and more major US vendors are expected to follow.
There have also been protests from the 5G corner, with Nokia one of the most vocal in warning how Trump’s Chinese tariffs could actually hamper 5G network rollouts in the US, by hindering the access of vendors like Nokia to chips and other components from Chinese companies.
For companies planning to lobby against Trump’s tariffs, the possibility of the US falling significantly behind China in 5G might be the best bet in swaying any changes.
Apple stock fell almost 2% following Trump’s statement earlier this week which helped temporarily gift Microsoft the title of the world’s most valuable company – edging past Apple by $1 billion to reach a market cap of $813 billion. Normal service has since been resumed.