If newly elected President Donald Trump follows through with sweeping new tariffs on everything made in China, your next iPhone could cost about $300 more, economists estimate.
If you like Samsung phones, the price increase probably doesn’t apply.
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Americans buy about 130 million new smartphones every year, mostly Apple or Samsung devices, making them one of the most purchased technology products.
The potentially higher prices for iPhones show how policy decisions in Washington can affect you — and how confusing and arbitrary they can be.
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How iPhones Skipped Trump Tariffs the First Time
First, a quick reminder: a tariff is a tax on products that cross borders.
For a simplified example, when Walmart imports bicycles made in Chinese factories into the United States, Walmart (or typically an importer hired by Walmart) pays a tariff to the U.S. government.
To pay that tax, Walmart might have to pay less to the Chinese factory for those bikes, absorb the cost of that tax itself, raise the price for that bike in its stores, or some combination of the three.
Trump and some conservative economists say tariffs won’t raise prices. But economists almost universally say that shoppers will ultimately pay more for a bicycle as a result of the tariff.
However, during the first Trump administration, Apple CEO Tim Cook helped convince the White House to impose tariffs on most of the products the company sells. That included iPhones, the vast majority of which are made in China.
Cook reportedly told White House officials at the time that tariffs would raise prices on smartphones, computers and tablets and hurt Apple. The White House seemed to agree. President Joe Biden’s administration has largely kept in place the Trump administration’s tariffs.
So while bicycles, luggage and washing machines imported from China were subject to higher tariffs, iPhones, Mac computers and iPads assembled in Chinese factories were not.
“Consumer electronics has been absolutely privileged,” said Mary E. Lovely, an economist at the Peterson Institute for International Economics, under U.S. tariff policies in the Trump and Biden administrations. “That shows the Tim Cook effect.”
No one knows what the Trump 2.0 administration will do. But as a candidate, Trump discussed a 10 to 20 percent tariff on goods imported from anywhere, and a 60 percent or higher tariff on anything from China.
Calculating that tax isn’t easy, but several trade experts said the tariff rate, if applied to Apple products, could impose a tax of about $300 on a $1,000 iPhone. Some of that higher tax would likely be reflected in the price you pay for iPhones.
Samsung smartphones are usually made in countries other than China, so the proposed higher tariffs on Chinese imports would not apply.
Spokespeople for the Trump campaign, Apple and Samsung did not respond to requests for comment.
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Maybe it won’t be so bad?
Business leaders generally believe that Trump will not impose all the tariffs he has discussed and that it is a negotiating strategy. It’s possible the next White House will once again skip tariffs on smartphones, computers and tablets.
Gary Shapiro, head of the Consumer Technology Association, an industry group that includes Apple and Samsung, said the previous Trump administration listened to manufacturers who said higher tariffs on electronics would hurt consumers.
This time, Shapiro said, “I’m optimistic because President Trump is a pragmatist.” (Shapiro also joked that the CTA stood for the “Consumer Tariff Association.”)
Companies have also adjusted to higher tariffs on many Chinese imports over the past six years. Many companies moved some production to other countries to avoid higher tariffs on goods made in China.
For example, research led by Professor Sheng Lu of the University of Delaware recently found that more than four in ten American apparel companies in a survey now import less than 10 percent of their products from China. In 2018, only 18 percent of U.S. apparel companies imported such a small percentage from China.
The shift in apparel production wasn’t just due to tariffs, but Lu told me that avoiding higher tariffs was one reason.
Scott Lincicome, an economist at the libertarian think tank Cato Institute, doesn’t think Apple could quickly give up Chinese factories to avoid higher tariffs.
Apple has moved a small portion of production to other countries in recent years, including Vietnam and India. But tariffs or no tariffs, Apple is locked into a marriage for the foreseeable future with Chinese factories, where armies of people and equipment make a fleet of Apple devices.
“There’s no other place you can go that has the capacity to meet the demand for all these gadgets,” Lincicome said.
The good news about higher rates is that, like most taxes, people typically find them painful when they’re new but get used to them, says Alan Deardorff, a professor emeritus at the University of Michigan who specializes in international trade.
However, he said your experience with the new Trump tariffs may be different. “With a 60 percent rate, you have to think people will notice,” he said.
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