How Apple Is Avoiding A $150 Per iPhone Levy

By Amit Chowdhry ● December 17, 2019
  • Apple has been able to avoid 15% tariffs on most of its products such as the iPhone, iPad, and MacBooks. These are the details.

Apple was able to avoid 15% tariffs on most of its products, including the iPhone, iPad, and MacBooks after U.S.President Donald Trump had signed off on a trade deal with China, according to Bloomberg LP global Apple/consumer tech reporter Mark Gurman. And Wedbush Securities managing director Daniel Ives pointed out that these import duties were supposed to kick in on December 15 and it could have added around $150 to the price of iPhones during the holiday season.

“Trump delivered an early Christmas present to Apple,” wrote Ives in a note to investors. “If this tariff went through it would have been a major gut punch for semi players/Apple and could have thrown a major wrench into the supply chain and demand for the holiday season.”

By holding product prices steady while being hit by additional tariffs, Apple’s earnings per share would take a hit by about 4% next year. And if the company increased iPhone prices, then demand would have likely shrunk 6% to 8% in 2020, according to Ives.

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Apple is paying duties on the Apple Watch, AirPods, iMacs, and HomePods. And some of those levies may actually get rolled back.

The deal with President Trump included a promise by the Chinese to buy more U.S. agricultural goods. And government officials discussed the possibility of reducing existing duties on Chinese products.

Even though Apple was able to avoid tariffs, the trade war has hit the company in other ways. For example, Apple depends on 1on suppliers and manufacturing partners that are based mostly in China. And Apple is having a hard time moving production to other countries.

As a result, Apple CEO Tim Cook has been working closely on a White House campaign to protect its products from the tariffs. And Apple CEO Tim Cook hosted President Trump at a Mac Pro assembly facility in Texas last month.

“Cook has become so crucial in these ongoing China negotiations,” explained Ives. And he said that Apple would have the most to lose if the tariff war does not see a truce going forward.

President Trump acknowledged that it would not be fair for Apple to get taxed on its products built in China while its largest rival Samsung Electronics would not have to pay the duties.