Apple lays out tariff hit it faces

Geneva Stokes
September 11, 2018

China will be forced to take necessary countermeasures if the United States insists on imposing new tariffs on $200 billion worth of Chinese goods despite strong opposition from both countries, the Ministry of Commerce said on Thursday.

Cell phones, the biggest USA import from China, have so far been spared, but would be hit if Trump activates the new $267 billion tariff list.

This week, Apple said that the tariffs would amount to a 25 percent tax on products like the Apple Pencil, AirPods, Apple Watch, HomePod, Mac Mini, and others (or individual components used in them) shipped to the United States, and that those costs would likely be passed along to customers.

He said Friday that tariffs on another $200 billion in Chinese goods are "in the hopper" and "could take place very soon". Trump said on Friday he is considering another $267 billion of tariffs on China, which analysts said will affect virtually every category of consumer goods, to retaliate against what he calls unfair trade practices.

"That totally changes the equation", Trump said.

Apple, like other tech giants, has benefited from the last year's overhaul to the US tax code, and the company has committed to returning much of the $252 billion in cash it held overseas.

That could help reignite US demands that Beijing narrow its trade gap, which has temporarily been overshadowed by their clash over complaints China steals or pressures foreign companies to hand over technology.

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According to the U.S. Census Bureau, the United States' trade deficit with China hit a record high in July 2018, with U.S. imports of Chinese goods rising year over year and Chinese imports of U.S. goods falling over the same period.

Zhang said the impact from US tariffs on China's exports would likely be limited over the next few months. "It would cause broad, disproportionate economic harm to USA interests", the letter said.

In its letter, Apple argued that the way USA trade officials calculate the U.S. trade balance - attributing the entire value of a product to a country like China where final assembly happens - fails to reflect the true value that Apple generates in the United States. That would mean penalties cover nearly all goods from China sold to the United States.

The move risks raising tensions between the world's two largest economies.

Trump has repeatedly called for companies to move production to the United States, or to keep it there, while pushing aggressive trade actions aimed at narrowing the USA trade deficit, which he equates with theft from Americans. "Trump's remarks confirm his intention to continue escalating trade sanctions until China capitulates, and China has equally clearly signaled it has no intention of doing so".

China has warned of retaliation if Washington launches any new measures. It also has a sizable business in China, which the Chinese could target in retaliation for USA trade actions.

"The direct economic effects of the U.S. -Chain tariff dispute have so far been limited".

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