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Apple Warns Trump’s China Tariffs Will Boost Its Product Prices

Apple has warned the proposed US tariffs on $US200 billion worth of products imported from China will raise prices for some of its popular consumer goods such as the Apple Watch and AirPods headphones – and that’s before counting in President Donald Trump’s latest salvo in the trade war.

The Mac mini desktop computer, Apple Pencil stylus accessory for iPads, various chargers and adapters and tooling equipment used to manufacture and design some products in the US will also be affected, the California-based company told the Office of US Trade Representative in a letter dated September 5.

The letter did not mention the iPhone, which accounted for about two-thirds of Apple’s $US229 billion in revenue in its most recent fiscal year. It also made no mention of the iPad, which brought in $US19.2 billion in sales in the most recent year, or most of its Mac computers, which generated $US25.8 billion.

The US has imposed $US50 billion worth of tariffs on Chinese goods with another $US200 billion in the final stages. The public had until Thursday to comment on the administration’s plan.

Meanwhile, Trump on Friday said he’s ready to go all in and is considering another $US267 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.

“Our concern with these tariffs is that the US will be hardest hit, and that will result in lower US growth and competitiveness and higher prices for US consumers,” Apple said in its letter.

Apple outlined how the company’s operations and products will be affected by the tariffs. Its shares, which had earlier gained 1 per cent, fell about 0.8 percent to close at $US221.30 on Friday.

The company said the tariffs would “show up as a tax on US consumers” and “increase the cost of Apple products that our customers have come to rely on in their daily lives.” Apple Chief Executive Officer Tim Cook earlier this year told Trump tariffs “were not the right approach.”

In the letter, Apple asks the US government to “reconsider these measures and work to find other, more effective solutions that leave the US economy and US consumer stronger and healthier than ever before.”

Beyond the core products, Apple said accessories like the HomePod speaker, some Beats speakers, AirPort and Time Capsule internet routers, the Magic Mouse and Magic Trackpad, and leather cases for the iPhone, iPad, MacBook and Apple Pencil would be affected. It said some of the parts it relies on for product development, including processors and research equipment, would also be hit by the tariffs.

In pushing back on the proposal, Apple said it bought more than $US50 billion worth of components from US-based suppliers last year and that it’s the largest US corporate tax payer. It also said that every Apple product “contains parts or materials from the United States and is made with equipment from US-based suppliers.” Earlier this year, the company said that as part of tax reform it would spend $US350 billion in the U.S. over the next five years.

Apple generated $US9.6 billion in sales in China in the fiscal third quarter, accounting for 18 per cent of its total revenue in the period.

Intel, the world’s second-largest chipmaker, weighed in supporting Apple’s opposition to the tariffs and broadening the argument. Computer and phone makers are involved in a global supply chain that includes Chinese manufacturing, and that can’t be easily excluded without harm to US companies, Intel said in a letter to the trade representative.

The US’s ability to continue to dominate telecommunications technology, including the upcoming fifth-generation phone networks, will be hampered by the levy on imports from China, it argued. – Bloomberg

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