In a significant turn of events for the tech industry, Trump’s administration has excluded smartphones, computers, and other electronics from its proposed reciprocal tariffs. The decision not only shields consumers from price shocks but also significantly benefits tech giants like Apple, which rely on China and other Asian countries for the manufacturing and assembly of their products.
Earlier in April, Trump imposed a 145% tariff on products from China and a 10% global tariff rate. However, on April 11, they exempted electronic devices and components, including semiconductors, solar cells, flat panel TV displays, flash drives, and memory cards. A 20% reciprocal tariff on all Chinese goods remains in effect.
In an ABC News interview with Commerce Secretary Howard Lutnick on April 13, he commented that, “So what President Donald Trump’s doing is he’s saying they’re exempt from the reciprocal tariffs, but they are included in the semiconductor tariffs, which are coming in probably a month or two. So these are coming soon.”
“We can’t be beholden and rely upon foreign countries for fundamental things we need. So this is not a permanent sort of exemption,” said Lutnick during the interview.
Apple, one of the tech giants in the smartphone industry, was especially affected by the tariff implementation as the majority of its iPhones, iPads, and MacBooks are manufactured in China and other Asian countries. As a result, Apple’s market value fell below $3 trillion two days after the tariff announcement.
Following the tariff exemption announcement, analysts at Morgan Stanley released a note regarding the White House announcement and how it brings Apple’s annualized tariff cost burden to $7 billion, which is significantly lower than the $44 billion estimated pre-tariff exemption.
The announcement boosted Apple shares by 2%, raising the company’s market cap back above $3 trillion.
In a briefing with the press in the Oval Office regarding Apple’s CEO Tim Cook, Trump said, “I speak to Tim Cook. I helped Tim Cook recently and that whole business. I don’t want to hurt anybody, but the end result is we are going to get to the position of greatness for our country.”
Trump’s goal for Apple hasn’t changed yet; he has called for Apple to make its products in the U.S. as he believes the country has the workforce and the resources to build an iPhone. Although this has not been confirmed by Tim Cook or anyone at Apple.
Following the tariff hike, Apple’s second option around the hike was to make US-bound iPhones and its other products in India and other countries. Its facilities in India produce more than 30 million iPhones per annum, watches and AirPods are built in Vietnam, and its production of the MacBook is expanding in Malaysia and Thailand.
However, the iPhone is still Apple’s biggest moneymaker. Apple currently sells 220-230 million iPhones annually, with the U.S. responsible for a third of the sales. About 87% of the iPhones are produced in China, with 4 in 5 iPads also made in the country, with 60% of MacBooks. These products collectively make 75% of Apple’s annual revenue.
Without China, Apple is sure to face setbacks in terms of the amount and skill of labor required to manufacture iPhones in the U.S. When asked at a conference why Apple does so much production in China, Cook said, “The reason is because of the quantity of skill in one location and the type of skill it is.”
