Last month, the Office of the U.S. Trade Representative granted 400 tariff exemptions for components manufactured in China. Apple received 10 exemptions for parts used in the manufacture of its Mac Pro computers. However, on Monday, the agency denied the Big Tech giant import tax relief on five key computer modules.
No More Exemptions
The Trade Representative makes exemptions to the 25 percent Sino-made goods tariff for three reasons. If an item is only available in China, if the import tax would economically harm the importer, and if the product is vital to Chinese industry. In July, Apple asked the government not to apply levies to its computer parts so the American assembly of Mac Pro could be financially viable.
In July, President Trump tweeted that the firm’s requests would be denied. He also advised the company to make its components domestically. In mid-September, the Trade Representative excused 10 Mac Pro components from being subject to import taxes. Subsequently, the Cupertino, California-based corporation announced it had relocated production of its prosumer computers from China to Austin Texas.
For some reason, this week, the Trade Representative took a different perspective on Apple’s Mac Pro parts. The organization determined its wheels, circuit boards, power adapter, charging cables, and processor cooling system would not be excused from trade duties.
Apple’s Next Steps
Following the federal government’s inexplicable decision to impose a 25 percent import tax on Apple’s components, the firm has a big decision to make.
On the one hand, the corporation could just eat the tariff cost or pass it along to consumers. However, a price hike might alienate the consumers who love the high-end computer system. In Q2 2019, the company experienced flat Mac sales and the situation could worsen with a sudden cost increase.
Alternatively, the corporation could relocate the assembly of its hardware to China. But laying off a host of American workers would be a public relations nightmare. Moreover, in December, the Trump administration is imposing a new tariff on Chinese made electronics. Right now, the electronics maker would see little benefit from a production adjustment.
Lastly, the firm could move ahead with plans to relocate parts of its supply out of China. In June, the corporation reportedly asked several of its suppliers to figure out how much it would cost to transfer 15 to 30 percent of their capacity out of the Sino mainland. If Washington isn’t going to excuse Apple from its trade war with Beijing, the corporation may want to explore establishing a production hub somewhere else in the world.