The sky-high price of the iPhone X is cited as the main reason why sales largely stalled after the December quarter. Yes, Apple sold plenty of iPhone X units in the quarters that followed, but not as many as it may have hoped.
This year’s iPhone X versions are supposed to be more affordable, according to virtually every leak we’ve seen. Some say that the cheapest new iPhone might cost anywhere from $599 to $799, with the latter being the more likely price point. The direct successor of last year’s iPhone X, meanwhile, would cost $899, while the Plus version will retail for $999.
But then came Donald Trump’s “good and easy to win” trade war with China.
The trade war with China is just one of the many trade wars Trump has started, but it’s probably the most significant one, and could have devastating effects on everyone, Apple included.
A new report from The Wall Street Journal explains that Apple might find itself in a position where the iPhone could be taxed both in the US and in China as a result of the US-China trade war. Who will end up eating the price increases? Not Apple, that’s for sure.
This isn’t the first report that details Apple’s worries with these trade agreements, and while Trump promised that the iPhone wouldn’t be included in the list of products to receive an import tariff, that might change in the future.
Smartphones were not included in the July 6th tariffs on $34 billion of Chinese goods, or on the $16 billion round expected for August. They’re not included in the third round of $200 billion either, but Trump is now threatening tariffs on a total of $500 billion in imports, which would consist of “about everything China ships to the US.”
China could answer with higher duties against American companies, and the iPhone might be a likely victim, considering that Apple accounts for the 9% of the Chinese mobile market.
The US imported last year $45 billion in mobile phones from China, the report notes, not all of them iPhones. But Apple would be hit harder than other device makers because most iPhones are mass-produced in China.
In a worst-case scenario, the iPhone could be taxed extra both when sold in America and China, which are Apple’s most important markets.
The report notes that a tariff of 10% on an iPhone X would add $37 to the import cost of $368, according to IHS Markit. Apple would either have to eat up those costs or pass them on to the customer.
On the other hand, hitting the iPhone with extra tariffs could hurt both governments, not just Apple, as consumers would not be happy with the additional costs. Furthermore, the Chinese government would have to think twice before taking actions against Apple, as the company has brought millions of jobs to China, including some 10,000 employees working for Apple, and over three million people in the supply chain, and 1.5 million app developers.