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Apple Watch, AirPods to Hit by Trump’s Proposed China Tariff


Apple AAPL recently claimed that a number of its products including Apple Watch and AirPods will be more costly if the proposed levy on Chinese goods worth $200 billion comes into effect.

The company made the claims in an unsigned letter submitted to the U.S. trade officials on Sep 5, as part of the public comment period, per Reuters.

Apple stated that the levy will push up prices of AirPods headphones, some of Beats headphones and the new HomePod smart speaker. Apple Watch along with Macmini and many accessories including Apple Pencil, Magic Mouse and Trackpad will be hit as well.

However, the company neither disclosed any specific revenue details from these products nor commented on any anticipated impact on iPhone, its flagship smartphone device, in the letter.

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Apple also stated that computer parts for its U.S. operations would be hit by the tariffs. The company said that “main logic boards with microprocessing units” could face levies, along with equipments used for research and development.

Additional Levy to Hurt U.S. Consumers

Apple stated that U.S. consumers will primarily suffer from the additional tariffs as the cost of products will rise significantly. In response, the U.S. President, Donald Trump asked the company to develop products within the United States, if it wants to avoid tariffs on Chinese goods.

Notably, in June, Trump imposed a 25% tariff on $50 billion worth of Chinese goods. The tariff is applied to goods in sectors like aerospace, IT, robotics and machinery, but not on consumer goods like smartphones or TVs.

These two items topped the list of top 10 products imported from China in 2017. Per Financial Times, the United States imported mobile phones and computers worth more than $100 billion in the last year. Moreover, top 10 of 15 most imported products from China were consumer goods including toys, sporting goods, household appliances and televisions.

However, the additional tariff on Chinese goods worth $200 billion wouldn’t spare these consumer goods. More than 6,000 items have been earmarked for a 10% import tariff, including minerals, which the United States designated as “critical” to its economic and national security.

Further, the additional tariffs will not only hurt Apple but also companies like Fitbit FIT and Intel INTC. The levy will impact sales of Fitbit’s health gadgets, while Intel believes the tariff will slowdown the progress of 5G networks.

Per Reuters, Trump is now planning to impose an additional tariff on imports worth $267 billion.

Apple to Contribute More Than $350 Billion in Next 5 Years

Apple also blamed the U.S. trade officials for failing to account its true contribution to the United States, due to their faulty process of calculating U.S. trade balance.

Apple, which sports a Zacks Rank #1 (Strong Buy), noted that it has spent $50 billion on 9,000 U.S. supplier including Finisar FNSR, Corning GLW and Analog Devices ADI in the last fiscal year. You can see the complete list of today’s Zacks Rank #1 stocks here.

Last year, Apple awarded $390 million to Finisar for the production of advanced semiconductor lasers used in iPhone X's True Depth facial recognition camera. The company also supported Gorilla Glass maker, Corning by investing $200 million. Both the investments were made from the company’s Advanced Manufacturing Fund.

Moreover, Apple reiterated its January statement that it expects to contribute more than $350 billion directly to the U.S. economy over the next five years. This had a provision of $55 billion spending for 2018.

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