Trump’s day-one tariffs on China haven’t been implemented yet, but he’s still maintaining the fiction that it isn’t American consumers who will pay the price.
There is no gray area here: tariffs are not a tax on other countries, they result solely in higher prices for Americans. Nonetheless, as he did during his first term, President Trump is again imposing tariffs, just not yet on China.
During the campaign, he committed to introduce tariffs on his first day in office, and specifically that he would levy a 60% tariff on imports from China, plus a further 10% duty on Chinese goods. None of that happened, and instead newly announced tariffs will instead start from February 1, 2025, for Mexico and Canada.
Those countries will face up to 25% tariffs, though there has been no specific figure yet.
It’s any tariff on imports from China that will make a difference to Apple, and to its prices, because such a large proportion of its manufacturing is done there. Trump has avoided committing to the China tariffs he previously promised, but did once more promise to impose them at some point.
He also threatened tariffs on the ten countries known as the BRICS grouping, which includes China. Trump further said he would increase tariffs and imposes taxes on China, again by unspecified amounts, if Beijing blocked the sale of TikTok to a US firm.
An unspecified source said to be familiar with the reasoning behind the hesitation over Chinese tariffs, said that Trump was instead keen to make a deal with President Xi Jinping. However, other sources reportedly say that as with his first term, Trump changes his mind quickly and may yet introduce tariffs on Chinese goods.
One other possible reason for delays is that Trump also wants to create an external revenue service to collect tariff revenues. That would require Congressional approval, and it’s not clear how it would differ from the existing processes — or why Trump didn’t also hesitate over Canada and Mexico tariffs.
The result is that US businesses are no clearer on how their costs will rise, so their US customers are little clearer on how prices will go up.
What it is not, and has never been, is an economic cost imposed on the countries where manufacturing is performed for US consumers. And, tariff price hikes are nearly always passed directly on to the consumer by the US companies who must pay the tariffs.
How this affects Apple and its prices
Apple does have an advantage in that it has previously persuaded Trump to grant it exemptions, although not consistently. Plus over the last many years, Apple has been working to reduce its dependence on China, with its suppliers moving production to countries such as India.
A stated aim of the tariffs is that it will actually move production and manufacturing to the US. If it becomes more expensive to manufacture overseas, goes the reasoning, then firms will invest billions in building factories in the US that they may not need after the next Administration.
However, it’s more likely that firms will move from China to other countries that have a manufacturing base that the US lacks that the US imposes lower tariffs on. Trump could always then increase those tariffs to match, but it would still probably be more economic for firms to take that hit rather than pay comparatively higher US wages.
Apple has already been making this shift, most notably to India as of late. It is doing this, Apple CEO Tim Cook says, mostly because of the skill shortage in the US rather than the cost of salaries.
Impact on consumers
In an October 2024 report, the Consumer Technology Association (CTA) examined how the proposed tariffs would affect consumers. As part of that, the CTA concluded that companies will not relocate to the US, and more that there will be what it called “unintended consequences.”
Those include the US credit rating being downgraded, and increased trade restrictions imposed on the States by other countries. It will also have less specifically measurable, yet significant, damage because of how it will reduce the reputation of the US overseas.
Until specific tariffs are imposed, it’s impossible to estimate how badly US consumers will be affected — even though it is certain that it will be bad. The CTA report estimated that laptop computers and tablets might even be priced 46% higher than at at present, while desktop computers could rise 6.2%.
Apple is a multi-trillion dollar company so at least in theory it could absorb these rises. It could decide to do so rather than see its number of sales drop, with the logic that a customer lost now is harder to win back after the tariffs end.
However, practically invariably, when any company is hit with a tariff, it is the end user, the consumer, who has to pay it.
Trump has now said that tariffs will “make us rich as hell.” It will not be Americans who profit, but the higher prices consumers pay as a result of the import tariffs will go to the government.
This story originally appeared on Appleinsider
