What you need to know
- Apple has avoided the 15% tariff hike on the iPhone, iPad, and Macbook.
- The United States and China have reportedly reached a trade deal.
- Apple still pays tariffs on the Apple Watch, AirPods, HomePod, and iMac.
Three days before they were set to begin, Apple has narrowly avoided the second round of tariffs that were ready to hit their products. Reported by Bloomberg, the United States and China have reached a limited trade deal that has prevented the 15% tariff increase.
The new tariffs were set to begin on December 15 and would have impacted the iPhone, iPad, and Macbook. Wedbush Securities analyst Dan Ives, in a note to investors, projected that the increase would have translated into as much as a $150 price hike to the iPhone.
"Trump delivered an early Christmas present to Apple. If this tariff went through it would have been a major gut punch for semi players/Apple and could have thrown a major wrench into the supply chain and demand for the holiday season."
Ives went further to say that if Apple had taken the hit of the tariffs without raising the prices of their products, it could have eroded the company's earnings by as much as 4% in 2020.
Holding product prices steady while swallowing additional tariffs would have cut Apple earnings per share by about 4% next year. If the company reacted by raising iPhone prices, demand would shrink 6% to 8% in 2020, Ives estimated.
While the trade deal has saved the iPhone, iPad, and Macbook from tariffs, Apple is still paying duties on the Apple Watch, AirPods, HomePod, and iMac. These could see rollbacks according to those familiar with the matter.
Apple has been lobbying against the increase in tariffs against its product line for the entire year and Tim Cook has been at the front of the battle. Cook has met with President Trump on multiple occasions throughout the year to lobby for the company, most recently taking the President through Apple's Mac Pro production facility in Texas. Ives stressed the importance of Cook's involvement in his note to investors.
"Cook has become so crucial in these ongoing China negotiations...Apple, more than any company out there has the most to lose if this tariff war does not see a truce going forward."