Tech Giant Apple Spared Financial Pain In Latest Round Of Tariffs On China

Sep 19, 2018
Originally published on September 20, 2018 10:10 am
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MARY LOUISE KELLY, HOST:

When the U.S. announced new tariffs on hundreds of consumer goods imported from China, one company avoided a big new tax - Apple. There are few American tech giants with fortunes so tied to China, where Apple's moneymaking iPhones are assembled. NPR's Alina Selyukh has more.

ALINA SELYUKH, BYLINE: The morning after the U.S. announced a new round of tariffs on Chinese imports, Apple CEO Tim Cook was scheduled to plug the latest iPhones to the audience of ABC's morning talk show "Good Morning America."

(SOUNDBITE OF TV SHOW, "GOOD MORNING AMERICA")

ROBIN ROBERTS: There's no applause sign. That came from the heart, Tim. That came from the heart.

TIM COOK: (Laughter).

SELYUKH: But this was the morning after Apple became one of the biggest topics of conversation about the U.S. trade relationship with China. The tech giant had just avoided tariffs on its smartwatch, Bluetooth headphones called AirPods and the HomePod smart speaker. So the first question Cook had to answer was why.

(SOUNDBITE OF TV SHOW, "GOOD MORNING AMERICA")

COOK: The iPhone is assembled in China. But the parts come from everywhere, including the United States. You know, the glass comes from Kentucky. There are chips that come from the U.S. And of course, the research and development is all done in the United States.

SELYUKH: He said the Trump administration must have realized that it did not want a tariff that would hurt all the work that Apple does in the U.S. For context, with the latest wave of U.S. tariffs, nearly half of Chinese imports are now facing a higher tax. For weeks, all kinds of industries lobbied trade officials to take their items off the list, making the case that American consumers would pay the price.

Two of the biggest categories that ultimately did get spared were, one, child safety items like bike helmets or playpens and, two, Bluetooth devices like Fitbit or Apple Watch. Here's what Commerce Secretary Wilbur Ross told CNBC about this change of heart.

(SOUNDBITE OF TV SHOW, "SQUAWK BOX")

WILBUR ROSS: We were trying to do things that would be the least intrusive on the consumer. And there was no particular need to do smartwatches at this time, to do Bluetooth or any things like that.

SELYUKH: Bluetooth devices in the U.S. are a multibillion-dollar industry. Think smart speakers, fitness trackers, smartwatches, wireless headphones. And Apple is by far the biggest player, with a massive production operation centered in China. Just this month, President Trump tweeted that if Apple wanted to avoid higher import costs from tariffs, it should build new plants in the U.S. and make products here. But then the Bluetooth tariffs were dropped.

ANGELO ZINO: Apple remains in a favorable position as far as trade is concerned, given their fairly good standing with the U.S. government.

SELYUKH: Angelo Zino is a technology analyst at a Wall Street research firm, CFRA. And he says most of Wall Street was not surprised that Apple's products got spared. Cook has had multiple meetings with President Trump and his trade team. He has also met with Chinese leaders. The New York Times has called him the tech industry's top diplomat. And millions of people have jobs connected to Apple in both the U.S. and in China.

ZINO: So at the end of the day, we continue to believe that both the U.S. and China will look to refrain from imposing tariffs on Apple-made products.

SELYUKH: Zino says, if anything, potential retaliation from China is the bigger threat to Apple. If China put a higher tax on U.S. imports, the company would have to reroute or pay more for all those U.S.-made parts, like those screens that are made in Kentucky. But for now, the iPhone appears to be untouchable on both sides of the ocean. Alina Selyukh, NPR News, Washington.

(SOUNDBITE OF MEDESKI SCOFIELD MARTIN AND WOOD'S "IN CASE THE WORLD CHANGES ITS MIND") Transcript provided by NPR, Copyright NPR.