Apple and other international tech giants once again missed the chance to escape the tariff war!

Last weekend, the U.S. Customs and Border Protection (CBP) quietly revised its tariff regulations on the evening of November 11th, exempting smartphone and computer electronics and their components from import duties, unaffected by the so-called "reciprocal tariffs" announced earlier, without specifying any country.

However, just a weekend later, Trump changed his mind. On the afternoon of November 13th, local time, President Trump said that there was no announcement last Friday regarding tariff "exceptions"; they were simply moved to different tariff categories. Trump implied that the U.S. government may still impose separate tariffs on the semiconductor industry and broader electronics supply chains.

U.S. Commerce Secretary Howard Lutnick made a similar statement on the same day, saying that smartphones, computers, and other electronic products are not subject to "reciprocal tariffs," but they are included in the semiconductor tariffs, which may be introduced in one or two months.

Previously, the expectation that Apple and other international tech giants would escape the tariff war again fell through.

In recent days, foreign netizens dug up an old interview from December 2017, when in a Fortune magazine program, Apple CEO Tim Cook explained why Apple is so reliant on manufacturing in China. Cook frankly stated that it is not due to low labor costs. Many people think Apple comes to China because of low labor costs, but this idea is outdated; Apple comes to China for its advanced craftsmanship and abundant talent pool.

Cook stated, "The real reason we come to China is related to technology, the concentration of regional skills, and the diversity of technological types."

Currently, Apple sells about 220 million to 230 million iPhones annually, with approximately one-third sold in the United States. According to Morgan Stanley's estimates, about 87% of the iPhone, Apple's most profitable product, is produced in China. Approximately four-fifths of iPads and 60% of Macs are also manufactured in China. These products together account for about 75% of Apple's annual revenue.

The production facilities for iPhones in India can currently produce at most about 30 million iPhones per year. Clearly, production in India cannot fully meet American demand.

Apple and other companies have consistently emphasized to the Trump administration that while they are willing to increase investment in the U.S., completely relocating final production back to the U.S. is almost impossible. Of the more than 700 precision parts required for an iPhone, 90% depend on Chinese and Asian suppliers. As pointed out in a report released this week by Bank of America, if Apple relocates its iPhone production lines to the U.S., its manufacturing costs could skyrocket by over 90%.

According to American media calculations, for an Apple device priced at $1,100, the manufacturing cost is approximately $580. Based on the initial cumulative tariff of 54% imposed on China, the total supply chain cost would increase by $296, causing the overall cost to soar to $876, surpassing the 50% mark. Not to mention, the U.S. then imposed an additional 50%, bringing the cumulative tariff directly above 104%.

For this reason, some analysts believe that Apple may choose to pass on the cost of tariffs entirely to consumers, which would increase the cost of purchasing new devices by 30% to 40%. If calculated based on a 104% tariff, assuming Apple wants consumers to bear these costs, the price of an iPhone 16 Pro Max purchased by Americans might directly rise to $3,261, equivalent to about 24,000 RMB.

To buffer against the huge short-term impact, about half a month ago, five cargo planes fully loaded with iPhones and other products took off from India and flew directly to the U.S.

This article originates from Finance World.

Original source: https://www.toutiao.com/article/7493131649908163113/

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