On September 1, the Trump administration levied a new 15 percent import tax on Chinese made electronics. As a result, popular consumer products like high definition televisions, smart speakers, and Apple Watches will likely experience a surge in pricing. Moreover, the American corporations that center there manufacturing in China will suffer significant financial consequences.
Indeed, electronics sector trade group, the Consumer Tech Association (CTA) told CNBC the Sino-American trade conflict had cost U.S. firms $10 billion.
The Tech New Tariffs
To get more favorable trade terms, the United States has waged a trade war with China. President Trump has sought to put pressure on Beijing by instituting a slew of new tariffs on Sino made goods. Beginning in early 2018, Washington levied import taxes on aluminum, washing machines, aircraft parts, and medical devices. In June of that year, the federal government issued new 25 percent duties on “industrially significant technology.”
The CTA, which represents brands like Apple, LG, and Walmart, says those levies cost U.S. electronics manufacturers and retailers $10 billion.
After failed trade negotiations earlier this year, the Trump administration threatened to apply a new 15 percent import tax on Chinese-made consumer electronics. Initially, the federal government scheduled its new tariffs to take effect on September 1. However, Washington decided to take pity on the tech sector and stagger the import taxes.
Accordingly, Chinese-made desktop computers, digital cameras, fitness trackers, lithium, smartwatches, and TVs now cost an extra 15 percent to import into the U.S. Conversely, Sino-produced laptops, smartphones, tablets, and video game consoles will be hit with the 15 percent levy on December 15.
CTA spokeswoman Bronwyn Flores told CNBC that consumers won’t feel the effect of the trade war escalation immediately. But she did warn consumers to do their holiday shopping now as the tariffs will impact the retail sector by November.
A Bite Out of Apple
Fearing the impact of the new import taxes, several tech luminaries have reached out to the White House. In June, executives from Microsoft, Nintendo, and Sony wrote a letter asking President Trump to exempt their hardware from the new tariffs. Thus far, the game industry leaders’ letter received no response. Similarly, Apple CEO Tim Cook personally asked the Commander-in-Chief not to slap tariffs on Mac Pro components.
In response, the President publicly announced he wouldn’t make an exemption for Apple.
Consequently, the firm’s Apple Watches, Air Pods, HomePods, and iMac desktops are now subject to a 15 percent duty. Notably, J.P. Morgan predicts the Big Tech firm will not pass its new costs onto consumers. As a result, analysts forecast the firm will take a $500 million hit in its hardware segment. However, industry watchers believe the corporation will be hurt considerably worse by the December tariffs.
CNBC reports Apple could sustain a $5 billion loss if it has to pay a 15 percent tariff on iPhones. Indeed, unless the firm receives a last-minute exemption, it will be faced with two bad choices. One, it could make its already pricey mobile devices more expensive and risk alienating consumers. That will be especially problematic as the company’s device sales hit a six-year low in Q3 2019.
Conversely, the firm could absorb the import tax and sell its flagship product with a reduced profit margin. With no end to the trade war in sight, Apple might be best served by taking the near term loss and moving its supply chain out of China.