iPhone might escape Trump’s tariffs, but Apple will suffer

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iPad and iPhone tariffs aren't happening. Yet.
You still don’t have to pay extra taxes for buying an iPad or iPhone made in China, but that could change.
Photo: Ed Hardy/Cult of Mac

No Apple products are included in the additional tariffs on Chinese products that went into effect this morning but Apple is still feeling some pain. The company’s shares have dropped significantly as trade tensions heated up between the U.S. and China.

And future import taxes on iPhone, iPad and Apple Watch are likely, according to Pres. Trump.

Tariffs for some, concerns for others

As of midnight last night, the Trump administration slapped 25 percent tariffs on many products U.S. companies import from China. However, this change only affects products that had previously been covered by 10 percent tariffs. None of Apple’s were.

Nevertheless, this company’s share price dropped 7 percent this week after Trump first threatened these additional taxes over the weekend. This decline is likely due to Trump’s additional comment that “325 Billions Dollars of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%.”

Get ready for an $1159 iPhone XS

“A 25% tax on the remaining $267 billion of goods exported from China to the U.S. would have considerable ramifications across Apple’s supply chain,” noted Katy Huberty from Morgan Stanley.

If that happens, the analyst points out Apple could absorb the extra taxes the U.S. government would charge to import products from China. Or the company could pass the cost of these taxes on to consumers, raising the price of an iPhone XS by $160, “which likely would dampen iPhone demand,” Huberty predicted.

A 25 percent tax on Apple’s Chinese imports isn’t inevitable. The U.S. and China are in  negotiations now attempting to head off a worsening trade war.

iPhone assembled in China, not made there

The Trump administration could hit Apple with these hefty import taxes despite CEO Tim Cook’s protests that the iPhone isn’t made in China, it’s only assembled there.

Components are manufactured around the world — including the US — and then shipped to China for final assembly. But the U.S. governament doesn’t care that an iPhone’s display comes from Japan and its processor and memory are made in Korea, when the assembled device is brought to the US from China it’s taxed as a Chinese import. Even though very little of the revenue from each unit stays in China.

Via The Street