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Apple Warns China Tariffs Could Force It To Raise Prices

September 10, 2018 - 3:50 pm

MOUNTAIN VIEW, Calif. (WCBS 880/AP) -- Apple is warning proposed tariffs on Chinese imports would force it to raise prices on a lot of its products.

Apple warned in a letter sent earlier this month to U.S. Trade Representative Robert Lighthizer that a potential new round of tariffs would "increase the cost of Apple products that our customers have come to rely on in their daily lives."

"Our concern with these tariffs is that the U.S. will be hardest hit, and that will result in lower U.S. growth and competitiveness and higher prices for U.S. consumers," Apple wrote in the Sept. 5 letter.

Bloomberg Reporter Mark Gurman told WCBS 880’s Michael Wallace that the concern is not over Apple’s best-known products.

“This is not about the iPhone or iPad per se, but this is more about the Apple Watch, the AirPod, some of their internet routers that they recently discontinued, some of their leather cases, some iPad accessories like the Apple Pencil stylus, the MacMini desktop computer, and then some of their internal computers used to develop their products,” Gurman said.

Apple said the $200 billion tariff on goods from China would affect pricing on those items, assuming the tariff goes ahead.

“The process here is that the Trump administration proposed the tariffs, and anyone who might be impacted has the right and the time to comment on it and give suggestions so the Trump administration could say, ‘Hey, are we doing the right thing here? Do we need to tweak it? Do we not need to do this? Are we just going to go forward with the current proposal?’” Gurman said.

For his part, President Donald Trump has advised that Apple can avoid the tariffs by moving its manufacturing to the U.S.

Trump proposed what he called "an easy solution": "Make your products in the United States instead of China." Yet that overlooks other significant costs, such as the difference in wages between the U.S. and China.

But Gurman said Trump’s suggestion is not realistic.

“It might sound simple and like the solution, but it’s not actually feasible for Apple at this point in its history because of the sheer quantity of devices they have to produce at the precision they have to produce them at,” he said. “These require factories that span, you know, the size of large cities across China, so it’s just not feasible to pull something like they do off in the U.S.”

The higher expense of U.S. labor also would likely boost the price of Apple products by 20 percent, CNBC.com reported, citing Bank of America Merrill Lynch.

Companies such as Intel are backing up Apple, and other companies, including Ford, have expressed similar concerns.

Ford on Aug. 31 said it was dropping plans to ship the Focus Active from China to America because of the tariffs.

Trump took to Twitter Sunday to declare victory and write: "This is just the beginning. This car can now be BUILT IN THE U.S.A. and Ford will pay no tariffs!"

But Ford on Sunday refuted Trump's claim, saying "it would not be profitable to build the Focus Active in the U.S." given forecast yearly sales below 50,000.

For now, that means Ford simply won't sell the vehicle in the United States. Kristin Dziczek of the Center for Automotive Research said that Ford can make Focuses "in many other plants around the world, so if they decided to continue to sell a Focus variant in the U.S. market, there are several options other than building it in the United States."

In April, Ford announced plans to stop making cars in the United States — except for the iconic Mustang — and to focus on more profitable SUVs. It stopped making Focus sedans at a Wayne, Michigan, plant in May. The plan, said industry analyst Ed Kim of AutoPacific, was to pare down the Focus lineup to Active wagons and import them from China. "Without the tariffs, the business case was pretty solid for that model in the U.S. market," Kim said.

The tariffs changed everything. The United States on July 6 began imposing a 25 percent tax on $34 billion in Chinese imports, including motor vehicles. Last month, it added tariffs to another $16 billion in Chinese goods and is readying taxes on another $200 billion worth. China is retaliating with its own tariffs on U.S. products.

The world's two biggest economies are clashing over U.S. allegations that China deploys predatory tactics — including outright cybertheft — to acquire technology from U.S. companies and challenge American technological dominance.

(© 2018 WCBS 880. The Associated Press contributed to this report.)