Over the past few weeks, Apple’s stock price has been particularly volatile in light of a proposed tariff from the Trump administration that would tax devices imported from China by as much as 25%. And seeing as how the vast majority of Apple devices and accessories are manufactured in China, there’s a legitimate concern among investors that the proposed tariffs would either raise the price of Apple products for consumers or force Apple to eat the additional cost.
Consequently, Apple earlier this week sent a letter to US Trade Representative Robert Lighthizer which articulates how the proposed tariff would have an adverse impact on Apple’s contribution to the United States economy.
The letter begins by laying out the extent of Apple’s current economic contributions.
In 2018, after the passage of tax reform in the U.S., we announced our intention to make a total direct contribution to the U.S. economy of over $350 billion over 5 years and we are pleased to report that we are on track to achieve this contribution. We are opening several new sites and adding new jobs to our U.S. employee base.
Apple is also the largest U.S. corporate taxpayer to the U.S. Treasury and pays billions more each year in local property, sales, and employee taxes.
The meat of the letter, so to speak, focuses on how the tariff would have the unintended consequence of bolstering China and other competitors not based in the U.S.
“U.S. tariffs would also weigh on Apple’s global competitiveness,” the letter reads in part. “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. Neither would our other major non-U.S. competitors.
“A U.S. tariff would, therefore, tilt the playing field in favor of our global competitors,” the letter concludes.
While it remains to be seen how this all plays out, J.P. Morgan last month issued a research note claiming that Trump’s proposed tariff would increase the price of the iPhone by approximately 14%. An entry-level iPhone XR, for example, might jump from $749 all the way up to $853.
Again, Apple would likely bear the brunt of this additional cost as opposed to passing it on to consumers, but this would obviously have a detrimental impact on Apple’s bottom line.
On a related note, Foxconn executive Young Liu recently said that the company — which manufactures the bulk of Apple’s products — would be able to meet Apple’s manufacturing demands under any type of political climate.
“Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the U.S. market,” Liu said a few weeks ago.
