Donald Trump, the US President, has placed tariffs (import taxes) on billions of dollars of product that’s made in and shipped from China. This trade war between the US and China has been going on for a year now, and only recently have both sides agreed to suspend increasing tariffs on each country’s products.
Under the current tariffs, products made in China can cost 10% more to produce, and that’s hard for businesses to swallow. If they can’t handle the cost, they will have to pass it on to their buyers.
Tariffs Meant to Increase
These tariffs were meant to increase on $200 billion of Chinese goods on January 1, 2019. But there’s some good news. The presidents of both countries, Xi Jinping and Donald Trump, have met at the G20 Summit, and have agreed not to increase tariffs on each other’s products. Tariffs have been halted for 90 days. However, there is a condition. Trump has said that if China continues to steal intellectual property and doesn’t meet his demands, then the tariffs will definitely increase to 25%.
iPhone, Made in America?
Trump wants manufacturing jobs to come back to the US. He believes that countries like China and Mexico are stealing high-quality jobs from Americans. Trump has said that he wants iPhones to be built and manufactured in the US – but that’s hard to do because if Apple products are made in the US, the price of American labour could increase the cost of the iPhone by 20-35%.
Even More Expensive iPhones
If China doesn’t meet Trump’s demands by the end of this 90-day ultimatum, then tariffs on Chinese made products will definitely go up to 25%. If this happens, Apple has to make a hard decision based on three options:
- Absorb the cost and keep the iPhone and other products the same price
- Pass on the cost to consumers
- Move factories from China to a different low-cost labour country
No matter what Apple chooses, it will be an expensive choice, and no doubt, the price of the company’s products will go up.
Apple Down, Then Up
When Trump first threatened to increase tariffs to 25%, Apple’s stock took a tumble down. But since this positive news came out today, Apple’s stock has gone back up. If anything, this news will have Apple making a decision on its future. Does the company take the risk and hope tariffs don’t increase? Or does the company choose to start making its products in other countries like Thailand, Vietnam, Indonesia, or the Philippines where high-tech companies like Nikon, Canon, Sony, and Samsung already make some of their products.
What it Means for You
No one except Donald Trump knows whether Apple will be slapped with 25% in tariffs on its products. So if you were on the fence about your next iPhone, iPad, or even AirPods, stop procrastinating. Buy what you need now before it’s too late!