Trumps Tells Apple To Move Production To U.S. After Company Raises Tariff Concerns
A range of Apple products could be impacted including Watches, Airpods, Beats headphones and Mac Minis.
U.S President Donald Trump has told tech giant Apple Inc to move its production to the United States if it wants to avoid heavy tariffs on Chinese imports.
Trump described it as an "easy solution" with not only zero tax but even an incentive for the company.
"Make your products in the United States instead of China. Start building new plants now," Trump tweeted on Saturday.
His comments come in response to a letter from Apple to trade officials earlier this week which said the proposed tariffs would affect the prices of a "wide range" of Apple products.
The company cited Apple Watches, Airpods, Mac Minis and Beats headphones as just some of the products that will be covered under the proposed tariffs -- as well as computer parts, chargers, mouse and trackpads, adapters and other gadgets.
The company urged the Trump administration not to implement the taxes saying it would increase the cost of its national operations, divert resources and disadvantage Apple compared to its foreign competitors.
"Tariffs will ultimately reduce the economic benefit we generate for the United States," Apple stated in its letter -- adding that it expected the company's direct contribution to the U.S economy to exceed $350 billion in the next five years.
"Given the balance of Apple’s economic footprint, the burden of the proposed tariffs will fall much more heavily on the United States than on China."
Earlier this week Trump said he had planned an additional $267 billion worth of tariffs on Chinese goods in the ongoing trade war between the two nations.
Where will apple go from here?
While Trump's response suggests the move will be simple for Apple, some experts disagree and say any change for the company's production will be expensive.
Director of the International Economy Program at the Lowy Institute Roland Rajah said it’s safe to assume that Apple outsources certain elements of its production to China because it is much cheaper.
"It's not that easy," Rajah told ten daily about the suggestion to move the company to domestic production -- adding that a large part of what China does is solely the process of assembling the Iphone.
"They certainly couldn't do it overnight."
Rajah said the company could look to avoid both the tariffs on China and the added expense of moving back to the U.S. by shifting its production to another country, such as Vietnam, to take advantage of cheaper labour.
"One way or another it's going to be expensive," Rajah said, but he suggested that not all of the additional costs would necessarily go to the consumer.
"Whether or not prices go up ultimately depends on whether Apple chooses to absorb the price increase," Rajah said.
While the tech giant could hypothetically absorb the full difference in cost, Rajah said because of its competition from companies such as Samsung, it's unlikely it would take it all on.
"They're going to have to balance it out. Apple has a fair bit of pricing power, but certainly not all of it."
Along with its international operations Apple has 2 million workers in the U.S. including 80,000 direct employees.
The technology sector is among the biggest potential losers in the escalating tariff war between the world’s two biggest economies.
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