Apple urges Trump administration to rethink Chinese tariffs

The U.S. is proposing a new $200 billion tariff on Chinese goods that is expected to affect a wide range of Apple products, according to a letter that the company sent to the U.S. government on Friday, as reported by MacRumors. While the iPhone doesn’t yet appear to be included, Apple said that new tariff would impact the Apple Watch, AirPods, HomePod, Beats headphones, AirPort routers, Apple Pencil, Magic Mouse and Magic Keyboard, MacBooks, Mac mini, and a selection of cables, chargers, and adapters, as well as tools used by Apple in its U.S. manufacturing, product repair, research and development facilities, as well as its data centers. In the letter, Apple is urging the Trump administration not to apply the tariff, insisting that it will actually have a negative impact on the U.S. economy, and to instead find “find other, more effective solutions that leave the U.S. economy and U.S. consumer stronger and healthier than ever before.” Apple’s letter did not mention the iPhone.

President Trump responded to Apple’s letter, suggesting that Apple move all of its manufacturing to the U.S., where there would not only be no tariffs but actually tax incentives. The President’s tweet resulted in a share prices among Apple’s suppliers falling throughout Asia, according to Reuters, dropping as much as 10 percent with some suppliers, with one analyst noting that Apple’s component supply chains will take a major hit if the U.S. increases tariffs on Chinese imported products.

Following the release of Apple’s letter, Gene Munster estimated in a note to Loup Ventures subscribers (via PED 3.0 / 9to5Mac), that U.S. tariffs on goods made in China would lower Apple’s revenues by five percent and its profits by less than one percent, adding that they would account for four percent of revenue in the 2018 fiscal year and grow at 35 percent in 2019, reaching five percent of sales, and estimating that the profitability of the Apple Watch and AirPods would be reduced to 10 to 20 percent, however this would only reflect a one percent drop in Apple’s profit overall in the 2019 fiscal year. The note also predicts that the tariffs would go away in two years.

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