President Donald Trump on August 1st announced he will impose a 10% tariff on $300 billion in Chinese goods starting September 1, 2019. This most likely means all assembled electronics will be included.
However, the U.S. Trade Representative has not released the finalized list. It’s possible the list was revised to remove certain products following the public hearings last month. President Trump’s decisiveness to impose this 10% tariff could spell catastrophe for Apple.
This will potentially increase iPhone prices, weaken their demand and negatively impact the company’s earnings per share, according to Wedbush Securities analysts Daniel Ive and Strecker Backe.
The Wedbush analysts called the move a “potential gut punch” for the company as they outlined the possible ramifications of the tariff on Apple. If Apple fully absorbs the tariff, it could negatively impact the company’s earnings per share by roughly 4% in the fiscal year 2020, the analysts say.
In the case that Apple transfers the tariff on to consumers, it could cripple iPhone demand by about 6 to 8 million units, based on Wedbush’s analysis over the next 12 months driven by its overall unit forecast of 185 million iPhones for the fiscal year 2020.
It rests questionable if any Apple products would eventually fall under the planned 10 percent tariff. In June, Apple told the US trade representative that a proposed tariff list would cover major products including the iPhone, iPad, and Mac. However, the company can apply for exemptions from the import duties.
Last month, the Trump administration revoked Apple’s appeal for a waiver that would have eliminated Chinese-made Mac Pro parts from a separate 25 percent tariff.
The tariffs could result in not only pricier iPhones but also pricier gaming consoles and laptops, given that many tech companies using components manufactured in China.
Trump tweeted, “We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing. More recently, China agreed to buy agricultural products from the U.S. in large quantities, but did not do so.”
Earlier in the week, a US delegation met with Chinese trade officials for the first time since the countries reached a truce at the June G-20 Summit, where China committed to buying more US agricultural exports.
On top of that, Trump says he is also planning to reverse the ban on sales between Huawei and United States companies. While Huawei has yet to be removed from the Entity List, the U.S. president says the ban was unfair to U.S. companies who provided Huawei with components. The U.S. Commerce Department will determine whether or not to remove Huawei from the list in the next few days.
