[Source/Observer Network by Shao Yun]
On February 2, U.S. President Trump's "reciprocal tariff" came into effect, severely impacting the U.S. tech stocks in after-hours trading. Apple, one of the "seven giants," led the decline with a drop of up to 7.9%. The New York Times and Bloomberg reported on February 2 that in order to avoid tariffs, Apple had diversified its supply chain layout in the past, transferring some production in China to Vietnam, India, and other countries. However, Trump's move to impose taxes on all trade partners this time may backfire on Apple's strategy.
Trump announced on February 2 that the U.S. would impose a minimum "base tariff" of 10% on all trading partners starting May 5, and a higher "reciprocal tariff" on countries and regions with the largest trade surpluses with the U.S., starting February 9. In addition to China, Vietnam, India, Malaysia, and other Asian countries as well as the European Union are also included in the list of countries subject to the so-called "reciprocal tariff." Trump claimed at the White House that this would be America's "economic independence declaration."
In response, the Chinese Ministry of Commerce said it firmly opposes these measures and will resolutely take countermeasures to safeguard its own interests.
Bloomberg reported that this move would hit Apple particularly hard. According to American media reports, although most of Apple's products sold in the U.S. are still produced in China, after Trump first imposed tariffs on China in 2018, Apple has expanded its manufacturing business to multiple countries and regions.
Apple now produces some AirPods, iPads, Apple Watches, and Macs in Vietnam. The New York Times reported that as of 2023, about 10% of Apple's top 200 suppliers use Vietnamese factories. Additionally, Apple is producing more iPhones and AirPods in India and plans for Indian factories to produce 25% of iPhones in the future.
However, Vietnam and India are now subject to "reciprocal tariffs" of 46% and 26%, respectively. Malaysia and Thailand, where Apple has Mac production lines, also face "reciprocal tariffs" of 24% and 36%, respectively. Apple also produces some iMacs in Ireland, an EU member state, which faces a 20% tariff.
This puts Apple in a dilemma. Bloomberg pointed out that iPhones, iPads, and Apple Watches account for three-quarters of Apple's nearly $400 billion annual revenue. Considering that Trump previously stated he would no longer grant exemptions as he did in his first term, Apple either has to absorb the costs itself or increase product prices, indirectly passing these additional costs onto customers.
"Apple will input these new tariff figures into their models and within hours they can know how big the problem is," said Anna-Katrina Shedletsky, co-founder of Instrumental, a U.S. software development company, and former head of Apple Watch product design.
As of publication, Apple fell nearly 7% in after-hours trading. CNBC reported that if this decline continues during regular trading hours on February 3, it will be Apple's largest single-day decline since September 2020.
In fact, not only Apple, but American media believe that other U.S. technology companies will also be directly or indirectly negatively impacted by Trump's "reciprocal tariff." The New York Times mentioned on February 2 that Google and Microsoft, which are less dependent on international suppliers, will also be affected. Tariffs may also increase the cost of building large data centers for companies, which are critical infrastructure for developing next-generation artificial intelligence (AI) technologies.
Trump advocates that tariffs can drive the return of manufacturing to the U.S. However, American media found that Apple has struggled to achieve large-scale production in the U.S.
It is worth noting that the Mac Pro is the only product Apple still produces entirely in the U.S. In 2019, due to manufacturing costs, Apple planned to relocate its Mac Pro production line in Texas, China. The Trump administration used a significant increase in import tariffs as "pressure" to retain this sole remaining domestic production line. At that time, Trump also visited the Texas factory and praised Apple as a model American enterprise.
However, in the years since, Apple has failed to transfer the production of any core products to the U.S. This is partly because there is a lack of skilled workers domestically—there were instances where workers at the Texas Mac Pro production line left early before shifts, causing the company to pause assembly lines. Additionally, Apple also struggles to find suitable component suppliers (such as custom screws) domestically. Currently, many components for the Texas plant still need to be imported from China.
Apple CEO Tim Cook once said that the U.S. does not have enough skilled manufacturing workers to compete with China. At a meeting in late 2017, Cook said that China is one of the few countries that can consistently provide skilled operators for advanced manufacturing equipment. "In the U.S., you can gather engineers for a meeting, but I can't guarantee filling this room. But in China, the number of people attending such meetings could fill several football stadiums," he said. "The skills here are incredible."
This article is an exclusive contribution from Observer Network and cannot be reprinted without permission.
Original article: https://www.toutiao.com/article/7488923584446923316/
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