1 day Ago By Varun Godinho
President-elect Donald Trump has vowed to impose a staggering 60 per cent tariff on Chinese-made goods and a 10-20 per cent tariff on all US imports – a move that could significantly impact American companies, including Apple. Trump’s pledge to do so isn’t without precedent. During his first time, his administration imposed tariffs on around 60 per cent of China’s products exported to the US.
They were subject to around a 25 per cent tariff, in addition to normal most-favoured-nation tariffs. If products exported from China to the US are manufactured or assembled by Chinese companies contracted by American companies, such as HP computers and Apple iPhones, Chinese companies have no obligation to pay the tariffs – the onus would be on American companies. Chinese companies only get low processing or assembly fees.
The brunt of the tariffs will be on the US companies exporting those products back into the US. Apple products with “Designed by Apple in California, Assembled in China” embezzled at the back of them fall into this category. Apple has started shifting some product assembly to countries such as India and Vietnam, but analysts point out that around 90 per cent of its products are still believed to be assembled in China.
When Apple’s iPhones, iMacs, iPads and Watches assembled in China enter the US market, Chinese contract manufacturers like Foxconn, Luxshare Precision and Goertek will not be hurt by the tariffs. According to Apple’s 2024 annual report, the average gross profit margin of its products is 37.2 per cent, with US sales totalling $167 billion (A$256.
34 billion). If Apple does not want to burden its customers with a price hike to offset the tariffs, shouldering the 60 per cent tariff would effectively reduce the gross profit margin of its products to zero. Apple’s 2024 iPad Mini.
If it decides to raise prices to offset tariffs, it would require to raise prices of its products in the US by an average of 37 per cent. Trump’s simplistic solution is to encourage companies to manufacture in the US once again. But getting Apple to move assembly back to the US is currently unfeasible.
Assembling iPhones and other Apple products is labour-intensive. Millions of workers in the US will not assemble Apple products for a monthly salary of $400 (A$613) – the average minimum monthly salary in China. Labour aside, Apple’s decision to manufacture in China also has to do with robust supply chains there, which will be difficult to replicate even in the other markets where it is now moving manufacturing to, such as India.
How much will all of this impact Apple over the coming months? Warren Buffett’s Berkshire Hathaway has slashed its Apple holding by around 60 per cent this year alone, forcing Apple shareholders to query Apple’s path under the new Trump administration..
