Tomorrow is the first day of a new month. Many look forward to September because the oppressive summer heat is dialed down and Autumn begins. The baseball playoff chase gets more exciting and the NFL kicks off a new season. But this year, something new takes place starting tomorrow, September 1st. 15% tariffs will take effect on $300 billion worth of Chinese goods imported into the U.S. To be clear, tariffs are merely an import tax that U.S. companies pay. These firms can absorb the additional cost of the tax, lowering profit margins and sending stock prices plummeting. Or, these companies can pass along all or some of the tax to consumers in the form of higher prices which can also damage the economy.
Originally, the Apple iPhone and other handsets imported from China were to be slapped with the 15% tax on September 1st. However,
President Donald Trump decided to hold off taxing these products until December 15th so that higher prices won’t slow down the economy during the holiday shopping season. However, not all products received this short reprieve and starting tomorrow, there will be some Apple devices getting taxed. While the tech giant designs most of its products in the states, the vast majority are manufactured in China by contract manufacturers that include companies like Foxconn, Pegatron, and Wriston. Apple does produce some iPhone models in India, but certainly not enough to make up for any meaningful amount of Chinese production.
If Apple decides to eat the cost of the tax, the retail prices of the company’s devices will stay the same
Starting tomorrow, two of Apple’s most popular products, the
Apple Watch, and the
AirPods, will be subject to the 15% import tax along with the company’s headphones and other products. Apple could decide to eat the extra cost, which it already does for certain iPhone and iPad cases, and consumers won’t notice any changes as far as pricing is concerned. But if Apple decides to share the pain with its customers, Americans will be digging a little deeper into their pockets to buy these products.
Starting tomorrow, Apple will pay a 15% import tax on the HomePod smart speakers it imports from its Chinese manufacturers
“The U.S. adding tariffs to any Apple product without some type of corresponding offset to mitigate the negative effects crosses the Rubicon on many dimensions. We believe the U.S. does not want to be the first to add tariffs to Apple, given Apple is arguably the leading U.S. company and the face of American business in China. The optics of a U.S. protectionist first approach penalizing a U.S. global leading company while China doesn’t penalize Apple would seem to surrender the moral high ground.”-Gene Munster, Loup Ventures
- Apple Watch and Watch bands.
- AirPods Wireless Bluetooth earbuds.
- HomePod smart speaker.
- Specific headphones under the Beats name.
- Apple iMac computers.
- Repair parts for iPhones.
- Nand flash chips, used for iPhone storage.
The devices that are listed above made up at least 10% of Apple’s revenue last year. The Apple Watch and the AirPods are two devices that are part of Apple’s fast-growing wearables segment that delivered 48% growth from last year’s fiscal third quarter to the same three month period (April through June) this year. Some analysts consider this unit to be
the one that will deliver the most powerful growth inside Apple; however if the two most important devices inside this unit are crippled by higher prices, that changes the outlook for the segment and for the entire company. Again, if Apple decides to eat the entire tax itself, consumers won’t notice any changes pricing-wise.
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