Apple in front lines of Trump trade war

Apple in front lines of Trump trade war
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Apple is finding itself on the front lines of President TrumpDonald John TrumpUS-Saudi Arabia policy needs a dose of 'realpolitik' Trump talks to Swedish leader about rapper A$AP Rocky, offers to vouch for his bail Matt Gaetz ahead of Mueller hearing: 'We are going to reelect the president' MORE’s trade war as the U.S. considers imposing tariffs on virtually all goods from China, including on popular iPhones and Mac computers. 

The tech giant — along with a range of other companies that manufacture products for U.S. consumers in China — will be closely watching the Group of 20 summit this week, where Trump and Chinese President Xi Jinping will try to reach an agreement to stave off the U.S. plans to impose tariffs of 25 percent on another $300 billion in Chinese imports. 

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But if the two leaders can’t come to a deal, Apple is facing a worst-case scenario that would likely force the company to increase prices for customers and even move some of its manufacturing business away from China.

Daniel Ives, an equity analyst with Wedbush Securities, described it as a “white-knuckle period” for Apple and its investors.

“There’s no gray area,” Ives said. “There’s either breakthrough, talks, and the [proposed tariff] doesn’t happen, or it starts to spiral,” Ives said. “In that situation, it really becomes a quagmire both for Apple as well as their investors.” 

Trump has initiated three other rounds of tariffs on Chinese goods since he came into office, but the latest proposal specifically targets consumer products including cameras, ink and toner cartridges, laptop computers, mobile phones and much more. The other rounds targeted technology parts and components, but this time “directly consumer-facing” items would be affected.

Apple has become a poster child for the tech industry’s battle against the escalating trade war, assuming responsibility as one of the largest and most influential companies that would take a hit if the administration greenlights the tariffs.

Last week, Apple asked the Office of the U.S. Trade Representative to exclude its products from Trump’s tariff hit list, arguing the cost would harm Apple’s ability to compete with Chinese companies such as Huawei and chip away at Apple’s ability to contribute to the U.S. economy.

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“U.S. tariffs would also weigh on Apple’s global competitiveness,” Apple wrote to U.S. Trade Representative Robert LighthizerRobert (Bob) Emmet LighthizerChinese, US negotiators fine-tuning details of trade agreement: report The Trump economy keeps roaring ahead Trump says no discussion of extending deadline in Chinese trade talks MORE. “A U.S. tariff would ... tilt the playing field in favor of our global competitors.”

The company is asking Lighthizer to strike Apple products from the proposed tariffs, which, if implemented, would affect the iPhone, iPad, Mac, AirPods, AppleTV and more.

The average price of the iPhone could increase by $110 to $140, while the price of Mac laptops could go up between 15 and 18 percent, according to Ives’s estimates.

“Apple’s products are used by American families, students, businesses, government agencies, schoolsand hospitals to communicate, teach, improve health outcomes, and enhance creativity and enterprise,” Apple wrote, noting that the company is “the largest U.S. corporate taxpayer to the U.S. Treasury” and has pledged to contribute $350 billion over five years to the country’s economy.

“We urge you not to proceed with these tariffs,” the company concluded.

Reports over the past week have indicated that Apple would consider moving 15 to 30 percent of its manufacturing out of China in light of the unpredictable trade war. But tech trade groups that count Apple among their members told The Hill the process of moving out of China would prove enormously complicated and onerous.

“The largest companies have invested millions, even billions in infrastructure, in training employees, in their operations overseas,” said Sage Chandler, vice president of international trade at the Consumer Technology Association (CTA). “It’s not that easy to just go someplace else and start it all over again.”

An estimated 5 million Chinese jobs rely on Apple’s manufacturing in China, and Apple employs approximately 10,000 people in the country. 

Apple has an important leg up over other companies railing against the proposed tariffs: company CEO Tim Cook’s close ties to Trump.

Just last week, Cook met privately with the president to discuss “trade” and “U.S. investment,” among other topics, a White House spokesperson confirmed to The Hill.

Trump has expressed a fondness for the business leader, and in March publicly touted their close relationship. “People like Tim, you’re expanding all over and doing things that I really wanted you to right from the beginning,” Trump said at a White House meeting focused on technology education. “I used to say, ‘Tim, you’ve got to start doing it over here,’ and you really have. I mean, you’ve really put a big investment in our country. We appreciate it very much.” Trump went on to refer to Cook by the name “Tim Apple,” which he later defended as an intentional turn of phrase.

Cook has sought to curry favor with top administration figures, in February joining a White House workforce initiative helmed by Trump’s elder daughter and senior adviser Ivanka TrumpIvana (Ivanka) Marie TrumpTrump steps up attacks on 'Squad' after post-rally furor Trump says he doesn't care if attacks on 'Squad' hurt him politically EXCLUSIVE: Career officials rebut claims of White House interference in security clearance process MORE and Commerce Secretary Wilbur RossWilbur Louis RossHistory in the House: Congress weathers unprecedented week The Hill's 12:30 Report: 'Send her back' chants stun Washington The Hill's Morning Report - Trump seizes House impeachment vote to rally GOP MORE.

And he has turned to K Street, with Apple in 2018 shelling out an eye-popping $6.68 million on lobbying.

“Cook has become a pseudo-ambassador between [the] U.S. and China,” Ives said. “Cook has spent many, many years building up Apple’s presence in China and he’s also built up a lot of political capital within D.C.”

“He’s one of the most respected business leaders in the world,” he added. “I think he has a strong voice that people listen to, both within the White House as well as within the business community.”

The Office of the U.S. Trade Representative last week held hearings with a range of companies — including many from the tech sector — about how the tariffs could harm U.S. businesses and even the country’s economy. About half of the $300 billion in imports are related to the tech industry.

The proposed tariffs could wind up costing the industry up to tens of billions of dollars, according to estimates from the Computing Technology Industry Association, which represents Apple, among other companies.

Linda Moore, the president and CEO of tech trade group TechNet, told The Hill that companies will likely be forced to raise prices on consumers, potentially lay off some of their workforce and pull funds away from the research and development of new technologies.

While the tech industry has railed against each round of new tariffs, the latest list has prompted the most aggressive pushback, with many companies saying they simply can’t withstand the potential duty of up to 25 percent on their products.

“Everything is hanging on that G-20 meeting between Presidents Trump and Xi,” Chandler from CTA said. “There’s a hope that there’s a deal that keeps these from going into effect.”

“But you just never know,” she said. “Each time we’ve hoped they wouldn’t go into effect, they have.”