Apple and its suppliers soared on the news that the iPhone would not be hit by tariffs in President Trump’s ongoing trade skirmish with China.
AAPL reached as high as $209.90 Tuesday. It started the day hovering around $200. That’s an increase of around 4.2%. Meanwhile, suppliers in Japan enjoyed a good trading day Wednesday. Some stocks jumped as up 6%.
The China trade war
At the start of August, President Trump announced plans to put 10% import taxes on a number of imports. This included virtually all Apple products, since these are made in China. The Administration changed its mind yesterday.
While certain devices like AirPods will still be hit, the import tariff on iPhones and Macs will be delayed from September 1 to December 15.
“Markets are responding with muted relief to the latest round in the trade saga – but nothing has really changed,” Robert Carnell, ING’s Asia-Pacific head of research wrote in a note to clients.
However, the reprieve hopefully leaves long enough for cooler heads to prevail. At the very least, it means that items can be imported ahead of the super-important holiday period. That’s crucial news for a company like Apple.
“Tokyo-listed Apple-related electronic parts makers and chip-related firms jumped [with the news]. Taiyo Yuden leaped 6.3%, while Murata Manufacturing and TDK Corp climbed 3.3% and 4.3%, respectively. Semiconductor manufacturing equipment maker Screen Holdings rallied 6.0% and chipmaking equipment supplier Tokyo Electron added 1.1%.”
Taking steps to avoid a future trade war
To try and avoid getting hit by future China trade war shrapnel, Apple’s taking steps to expand its supply chain. It has asked its suppliers to explore manufacturing outside of China. This will likely take place in locations like Vietnam, India, and Taiwan. However, it will take some time to get this established.
Analysts had been speculating about whether Apple would pass the cost of import duties on to customers. The other option would be to swallow it itself. This would mean eating into its own profit margins. The general consensus seemed to be that it would do this, so as to avoid increasing iPhone prices even more. However, this would likely have changed at some point were the tariffs to continue indefinitely.
For now, it seems that Apple may not have to do either. But given how unpredictable this whole trade war has been, we’ve probably not seen the last twist in this tale just yet.