President Donald Trump suggested this morning that Apple should move its manufacturing plants to America as a way to avoid tariffs in the ongoing trade dispute between the US and China, following reports that the company’s products could become more expensive.
The Trump administration began imposing a series of tariffs on goods from China this summer, but up until now, consumer electronics have been left off the list. That could soon change, as the latest proposed round of tariffs could include products from companies like Apple, Fitbit and Sonos. This week, Apple said that the tariffs would amount to a 25 percent tax on products like the Apple Pencil, AirPods, Apple Watch, HomePod, Mac Mini, and others (or individual components used in them) shipped to the United States, and that those costs would likely be passed along to customers.
This morning on Twitter, Trump urged Apple to build new manufacturing plants here in the US to avoid the tariffs. He suggested that there could be no tax — it’s not clear if he just means this particular tariff — and that there could be tax incentives for relocating.
Apple prices may increase because of the massive Tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive. Make your products in the United States instead of China. Start building new plants now. Exciting! #MAGA
— Donald J. Trump (@realDonaldTrump) September 8, 2018
Apple does manufacture Mac Pros here in the US, but a majority of its products are produced in China. Last year, Apple invested $1 billion in Corning, which manufactures the glass used in screens for the iPhone, and Trump said that CEO Tim Cook committed to building “three big plants, beautiful plants” in the US. Earlier this year, the company also said that it would spend hundreds of billions in the coming years to hire more workers and invest in domestic manufacturing and supply chain infrastructure. Apple supplier Foxconn also recently established a US headquarters ahead of plans for a major LCD factory in Wisconsin.
But while moving its manufacturing operations to the US would allow it to skip the tariffs, Apple’s products likely wouldn’t be any cheaper. China is an attractive to tech manufacturing because its workforce is cheaper and the plants that produce individual components are in close proximity to one another. Moving that manufacturing infrastructure would be costly. On Twitter, Trade lawyer Scott Lincicome pointed out that an iPhone would be more expensive to manufacture here in the US, citing a Marketplace report from 2014 that suggested that the component cost of an iPhone in China was around $190 per phone. In the US, that price jumps up to around $600, pushing the device — at the time — to a predicted price of $2000, far more than what would be seen under the tariffs.