On Friday, the US raised import taxes to 25 per cent on billions of dollars’ worth of Chinese goods, marking the latest escalation in a growing trade war that has raged on for more than a year.
When the tariffs were initially announced, many saw them as a negotiating tactic, designed to put pressure on the ongoing trade talks between President Trump and Chinese President Xi Jinping. But with Trump now in Washington and cheerleading the new taxes on Twitter, it seems clear that the 25 per cent tax will be around for a while.
China has already retaliated with additional tariffs on $60 billion worth of US imports to China, including chemicals and frozen produce, raising the real danger of further escalation from the US.
US hardware companies are deeply reliant on trans-Pacific trade, but, so far, tariffs have mostly avoided assembled computers and smartphones, focusing instead on unbundled components likely to have less effect on end consumers. But that doesn’t mean tech companies are entirely unaffected.
In September, Apple sent a letter to the US Trade Representative laying out exactly how it would be affected by the proposed tariffs and pleading for changes before the final codes were implemented. Some high-profile categories on the list were ultimately exempted, including the code for AirPods and the Apple Watch.
But the codes involved in Apple’s “adapters, chargers, cables and cords” stayed on the list, and, starting last September, they have been taxed at a 10 per cent rate when they entered the US from China.
The same is true for iPhone cases and the iPad’s leather covers, both of which are also subject to the tariff, per Apple’s letter. On Friday, that jumped to 25 per cent. (Apple declined to comment when reached by The Verge.)
So far, that cost has been born entirely by Apple and its suppliers. The prices listed on Apple’s website haven’t budged since the tariffs went into effect. At $70 for a charger (which would cost you as little as $11 under other circumstances), it’s possible Apple’s margins are wide enough that they’re able to simply eat the extra cost.
It’s also possible that Apple’s Chinese manufacturing partners were willing to offer a slight discount in light of the tariffs. It could even be that, since September, Apple has been able to shift its supply chain around enough to dodge the impact of the tariff completely. But given Apple’s massive scale and intense quality demands, such a move might have been more expensive than just paying the tariff.
None of this is likely to mean much for Apple’s bottom line. Chargers and phone cases aren’t a big part of the company’s business, and with nearly $20 billion in profits last quarter, a slight jump in costs isn’t the scariest thing it’s facing.
But with Trump and China still locked in a staredown over trade rules, it’s easy to imagine the next escalation bringing AirPods and Apple Watches back into the mix, to say nothing of iPhones and MacBooks. If that happens, things could get grim for Apple — and even more expensive for its customers.