Briefing: Renewed trade tension exposes Apple’s vulnerabilities
May 13, 2019
Apple and the iPhone Near Trade Crosshairs Again – The Wall Street Journal
What happened: US President Donald Trump last week threatened a tariff of 25% on $325 billion in Chinese imports that haven’t previously been targeted by duties, which would affect almost all Chinese exports to the US, including Apple’s most important devices, including iPhones, iPads, and Macs, that are assembled in China. Apple also counts on Greater China for about one-fifth of its sales, making it vulnerable if China fights back with higher duties against American companies. Apple would also be a likely target of China’s punitive actions as iPhone has 7.4% of the country’s smartphone market.
Why it’s important: As an American company that manufactures most of its devices in China, Apple is exposed in the escalating trade war. Apple last month posted its first consecutive drop in quarterly sales and profit in more than two years as iPhone sales fell 17% in the first quarter of 2019. The trade war does not appear to be resolving anytime soon as the US-China trade talks ended last week without a deal. Although Apple is diversifying its supply chain by planning to assemble devices in India, it will take time for the company to transfer production from China, making it unlikely to avoid the US tariffs this year.