International

China Trade Deal Helps Apple Avoid iPhone Tariffs

China Trade Deal Helps Apple Avoid iPhone Tariffs

President Donald Trump announced on Friday (Dec. 13) that the U.S. had reached a phase-one trade deal with China and that the tariffs set for Sunday (Dec. 15) “will not be changed,” according to a report by CNBC.

“We have agreed to a very large phase-one deal with China. They have agreed to many structural changes and massive purchases of agricultural product, energy and manufactured goods, plus much more. The 25 percent tariffs will remain as is, with 7-1/2 percent put on much of the remainder….” the president tweeted on Friday (Dec. 13).

The news is especially fortuitous for Apple, a company that has a huge supply chain based in China that would be largely impacted by the tariffs. The 15 percent tariffs, which were scheduled to start on Sunday, targeted consumer goods made in China, like computers and phones.

Apple already pays tariffs on its Apple Watch and Air Pods, but it has yet to raise its prices in the U.S. The company produced about 218 million iPhones last year, most of which were assembled in China.

Apple’s stock climbed almost 1 percent on the news.

“While this continues to all be a game of high-stakes poker between the U.S. and China, Apple, given this tariff deadline, was directly in the crossfire given its flagship iPhone manufacturing footprint in China,” Wedbush Analyst Dan Ives wrote in a note on Thursday (Dec. 12).

Wedbush said Apple would be one of the companies most affected if no deal could be worked out.

Apple also sells a good volume of its products in China: The company reported a revenue of $51 billion in the country last year, in a geographical area that includes Hong Kong and Taiwan. The region, called “Greater China,” accounts for Apple’s third-largest region by sales volume.

Apple CEO Tim Cook has put in a lot of effort with the Trump administration to illustrate what effect the tariffs would have on the company, especially since they wouldn’t affect Samsung. “I thought he made a very compelling argument,” Trump said in August. “It’s tough for Apple to pay tariffs if it’s competing with a very good company that’s not.”

——————————–

Featured PYMNTS Study:

More than 63 percent of merchant service providers (MSPs) want to overhaul their core payment processing systems so they can up their value-added services (VAS) game. It’s tough, though, since many of these systems date back to the pre-digital era. In the January 2020 Optimizing Merchant Services Playbook, PYMNTS unpacks what 200 MSPs say is key to delivering the VAS agenda that is critical to their success.

TRENDING RIGHT NOW