iPhone gets the official nod of approval for tariff exemptions

For those who are facing uncertainty over the potential introduction of tariffs on products and components originating in China, the confirmation of Apple’s exemptions will perhaps rub salt into the wound.

Although the idea of preferential treatment is a stretch, a lot of good things do happen to Apple. With new tariffs looming on the horizon, Apple has received approval for 10 of the 15 applications it made for exemption. Details are thin on the ground for the moment (the US Trade Representative website had crashed at the time of writing), the damage which would be inflicted on the iLeader’s Mac Pro computers.

Dedicated Apple followers will now breath a sigh of relief as the prospect of increased costs being passed onto the consumer are much lower. Apple will have to swallow some additional costs, not every application was approved, but the impact will now be limited.

The Apple issue is a relatively complicated one. Although the Mac Pro products are assembled in the US, many of the components are manufactured in China. For example, partially completed circuit boards are imported to a plant in Texas for the final product to be assembled.

Texas does appear to be an interesting element in this story…

On July 26, President Trump tweeted “Apple will not be given Tariff waiver, or relief, for Mac Pro parts that are made in China. Make them in the USA, no Tariffs!”, before going onto explain the next day that Apple was considering opening a manufacturing plant in Texas as a means to avoid the financial penalty. The claims followed meetings between the President and Apple CEO Tim Cook, but Apple is yet to make any announcement which would resemble what Trump is claiming.

In fact, during the last earnings call, Cook suggested the tariffs presenting a significant problem for Apple. The current set-up was not necessarily feasible, with some fearing these comments meant production could be moved out of the US completely.

Much of Apple’s manufacturing supply chain is currently located in China. One reason for this will be the cost of labour, land and local materials, but it is worth noting that China has skillset which cannot be replicated in the US. China is a hotbed for the worldwide manufacturing industry, and such, careers like Precision Tooling have thrived while they have suffered elsewhere. Sourcing talent outside of China is as much of a supply chain headache as swallowing the cost is.

While an unknown number of companies will be sweating over the seesawing nature of the US/China trade relationship and potential tariffs, Apple seems to be coming out unscathed at each turn in the road. With these exemptions, and the delay of the tariffs which would have impacted the production of the iPhone, the Apple lobby seems to be working very effectively.