Apple Inc. has suffered a major setback in the wake of the US-China trade war championed by the Trump led administration which continues to escalate.
President Donald Trump on Sunday said he had a discussion with Tim Cook, Apple’s CEO concerning the effect of the tariffs on the remaining products from China entering into the US and the stiff competition with South Korean company, Samsung Electronics Co Ltd.
The US President, imposed a 10% tariff on additional $300b worth of Chinese goods, including toys and consumer electronic gadgets; a tariff which would take effect in two stages, September 1 and December 15. The announcement via twitter had caused and uproar among big techs and escalated the trade war which had simmered down.
The tariffs mean that consumers would pay more for mobile gadgets and laptops. Apple was just resuscitating from a financial strain and had managed to pull through the last quarter before the news. With surging prices, consumers are holding longer to older devices or switching to alternatives like Samsung and Oppo.
In fact, Apple slipped to fourth place in the smartphone market, according to current statistics. The one time giant now sits behind Samsung, Huawei and Oppo, an emerging Chinese brand. With its reluctance to produce less expensive phones, coupled with the newly imposed tariffs, the smartphone maker is on the verge of losing its grip. Initially, it had only one contender, the South Korean brand. Now, it has three and others!
Given that Samsung would not be subject to the tariff, it’s a worse case for Apple. With the recent prices on its mobile gadgets, the company records low sales. The tariff would mean an additional $70 at least per mobile phone. Even though Apple decides to absorb the tariff by maintaining the initial cost for mobile phones, it would still increase the prices if the company must survive. The company generates a large revenue from the sale of its smartphones.
Speaking with reporters at New Jersey, Trump said of Cook, “I though he made a very compelling argument, so I’m thinking about it”. He added in a tweet that his administration was doing well with China.
Apple’s MacBook laptops and iPhones are free from the tariff until Dec 15. Some others like Apple smartwatch, AirPods, and HomePod are subject to the tariff on Sept 1, giving the company a little time to deal with its uncertainties.