Apple Says China Tariffs Will Hurt Its Competitiveness and Raise Prices

HANGZHOU, CHINA - DECEMBER 01: (CHINA OUT) A red Apple logo is seen on the Apple store on December 1, 2015 in Hangzhou, Zhejiang Province of China. Hangzhou Apple Store turned its logo into a red Apple to remind citizens of preventing AIDS on World AIDS Day. (Photo by Xu …
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Apple said the second round of tariffs on imports from China will hurt the company and “ultimately reduce the economic benefit we generate for the United States.”

In a letter to the Office of the U.S. Trade Representative, which has been preparing to implement tariffs on an additional $200 billion of Chinese goods, Apple said that the tariff would hit its Apple Watch, Air Pod headphones, Mac Mini desktop computers, and even the leather covers it sells for iPhones and iPads.

“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.

The company said that “because all tariffs ultimately show up as a tax on U.S. consumers, they will increase the cost of Apple products that our customers have come to rely on in their daily lives.”

That remains to be seen. Tariffs on imported steel and aluminum have not pushed up prices for consumers. Tariffs can be absorbed by manufacturers instead of being passed on to consumers, resulting in lower profit margins.  In the third quarter of the 2018 fiscal year, which runs from April to June, Apple’s gross margin was 38.3 percent. The average gross margin for U.S. companies, excluding financial institutions, is around 33 percent. That suggests that Apple could absorb more margin pressure than most companies.

The U.S. Trade Representative’s public notice and comment period for the proposed second round of tariffs ended Thursday. Apple’s letter is dated Wednesday. An announcement that the tariffs will be imposed is expected to come soon, perhaps as early as Friday.

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