With the holiday shopping season on the horizon, many companies and consumers have been worried about rising costs at a critical time of the year following President Trump’s announcement earlier this month that the U.S. would impose additional 10% tariffs on $300 billion worth of Chinese goods starting on Sept. 1. Companies and economic experts have urged the administration not to follow through with the extra taxes, pointing to potential harm to the U.S. economy.
The tweeter in chief has now partially acquiesced and agreed to delay some of the tariffs, sending Apple (NASDAQ: AAPL) shares higher.
Gadget tariffs delayed to Dec. 15
The U.S. Trade Representative (USTR) Robert Lighthizer announced this morning that certain products would be removed from the tariff list set to go into effect next month, which most notably includes a wide range of electronics and consumer gadgets — popular gifts over the holidays. Instead, the tax on those categories will take effect on Dec. 15. USTR cited “health, safety, national security and other factors” for the change of heart.
“Further, as part of USTR’s public comment and hearing process, it was determined that the tariff should be delayed to December 15 for certain articles,” USTR said in a statement. “Products in this group include, for example, cellphones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”
During said public comment and hearing process, Apple had warned in June that the tariffs would “would result in a reduction of Apple’s U.S. economic contribution.” The original list covered every single major Apple product, including the iPhone, iPad, Apple Watch, and various Macs, among others. Trump said in July that Apple would not be granted any tariff waivers for Mac Pro parts coming out of China, following reports that the company is planning to move Mac Pro production from the U.S. to China.
On the most recent earnings call, CEO Tim Apple downplayed those rumors:
In terms of the exclusions, we’ve been making the Mac Pro in the U.S., and we want to continue doing that. And so we are working and investing currently in capacity to do so, because we want to continue to be here. And so that’s what’s behind the exclusions. And so, we’re explaining that and hope for a positive outcome.
The chief executive also noted that “the vast majority of our products are kind of made everywhere.” Apple has been looking to diversify its global supply chain in order to mitigate geopolitical risks, making moves to spread out its manufacturing footprint across Southeast Asia.
Thanks to Apple’s disproportionate influence on both of the world’s two largest economies, it has become a poster child for the trade war — for better or for worse. Cook believes the U.S. and China have an “unavoidable mutuality,” but rising economic nationalism in both countries is putting that idea to the test.
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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple. The Motley Fool has a disclosure policy.