Apple might have to raise prices on some of its products due to President Donald Trump’s latest proposals to charge a 10 percent tariff on Chinese imports. As a result of Trump’s trade war with China, U.S. consumers might be paying more for products — such as Apple Watch, AirPods earphones and HomePod speakers — if Apple has to compensate for higher duties on the Chinese-made products.
If the tech giant doesn’t raise prices, it could take a hit to profit margins.
According to CNBC, analysts at Morgan Stanley noted “increasingly heated trade rhetoric between the U.S. and China” as one of the “greatest risks” to Apple’s share price in the months leading up to the new iPhone in September. Canalys, a market researcher, estimated that Apple shipped 3.5 million watches in Q2, with more than half sold in North America.
Vincent Thielke, a Canalys analyst, said, “If there was a change in price, obviously that’s going to impact demand.”
Neil Cybart, an Apple analyst at Above Avalon, found that other product revenues rose 38 percent in the quarter to $3.8 billion, and said that “over time, it is inevitable that ‘other products’ will become the third-largest revenue line item for Apple,” overtaking Macs and iPads.
The Trump administration’s most recent $200 billion list of affected categories include smart speakers from Apple’s rivals, such as the Amazon Echo, Google Home and Sonos, as well as Fitbit smartwatches. However, the companies still have time to lobby for their products to be excluded from the tariffs. One of the issues is that the import code encompasses “machines for the reception, conversion and transmission or regeneration of voice, images or other data,” according to the Consumer Technology Association (CTA).
“It’s a broad category that captures everything from gateways to modems to bluetooth-enabled devices,” said Sage Chandler, the CTA’s VP of International Trade. “In short, the ecosystem of products that enable users to access and ‘interact’ with the internet.”