In a letter to U.S. Trade Representative Robert Lighthizer, dated last Monday but released to the public on the following Thursday, Apple said tariffs would “result in a reduction of Apple’s U.S. economic contribution,” as the fees would impact all of its major products (iPhone, iPad, Mac, AirPods and Apple TV) as well as accessories like monitors, batteries and parts used to repair devices.
If the Office of the United States Trade Representative (UTSR) moves forward with more tariffs against China, Apple claims the company’s competitiveness as well as the amount of monetary contributions it makes to the U.S. economy would be damaged. The tech company urges the U.S. to not move forward with new fees that would affect the iPhone and its other devices.
The company even goes a step further to say that should the tariffs be put in place, the playing field will skew towards Apple’s global competitors. “The Chinese producers we compete with in global markets do not have a significant presence in the U.S. market, and so would not be impacted by U.S. tariffs,” Apple wrote in the latter. “Neither would our other major non-U.S. competitors.”
Now, Apple did not specifically name the rivals they were referring to in the letter, however it’s easy to take a guess that they might be China-based Huawei and other rivals like South Korean- based Samsung. Just over a year ago, Huawei (who is currently facing a U.S. ban) overtook Apple to become the world’s second largest phone vendor. Huawei’s smartphones sales have soared even though it doesn’t have an official presence in the U.S., one of the world’s largest markets.
While Apple designs its phones and other devices in the U.S., the devices are actually assembled in China — like many other electronics. Its products have previously avoided added fees, but the ongoing trade war with China could expand tariffs to the various devices Apple sells. That could mean higher prices for consumers and would affect the amount of money Apple makes from its products.
Additionally, Apple outlines the large role it plays in the U.S. economy. It’s “responsible” for over two million jobs across all 50 states, including Apple’s direct employees, manufacturing and retail partners and app developers who’ve benefited from creating software for Apple’s iPhones, iPads and other devices.
“We are pleased to report that we are on track to achieve this contribution,” said Apple’s letter. The first round of tariffs, announced a year ago and implemented earlier in 2019, affected more than 1,100 types of products. The U.S. government specifically excluded “goods commonly purchased by American consumers such as cellular telephones or televisions.” This includes iPhones. However, more recent tariff plans would affect the iPhone.
If the Trump administration decides to impose tariffs on iPhones and other electronics, it’s likely that Apple and other companies would pass the increase on to consumers. Apple’s latest iPhones already start at $749 for the iPhone XR, $999 for the iPhone XS and $1,099 for the iPhone XS Max.
Trump as long called for Apple to move it’s device manufacturing to the U.S., something that in all honestly, is not likely to happen. However, some reports say Apple may be considering moving up to 30 percent of iPhone production out of China and into places in Southeast Asia, like Vietnam where Samsung assembles a large chunk of its smartphones.
It’d be difficult for Apple to move such a large chunk of its smartphone production out of China, though. “Apple has ‘bet the farm’ on its flagship China production factory, which produces the vast majority of iPhones globally and represents the hearts and lungs of the Cupertino ecosystem,” Wedbush analyst Daniel Ives noted.
He said that in the best case scenario, Apple would be able to move about five to seven percent of iPhone production to India in the next 12 to 18 months. Moving 15 percent of production from China to other regions would take at least two to three years, he estimated.