Why Trump bid for iPhones to be made in U.S. is a bad idea

Trump allegedly uses two iPhones. Apple maintains that the bulk of the research and design ...
Trump allegedly uses two iPhones. Apple maintains that the bulk of the research and design for the iPhone and other devices is done in the United States. But the country lacks the skilled labor needed to manufacture those products. Photo/COURTESY

President Donald Trump is considering new tariffs on China that could make iPhones way more expensive for Americans.

Trump said this week that he won’t rule out an additional round of tariffs on Chinese exports that would hit Apple’s signature product as well as laptops.

Such a move would hurt US consumers and American companies because the taxes would be levied on the goods when they enter the country. Apple would have to decide whether to raise its prices to compensate.

“The direct impact would be in the United States,” said Bryan Ma, analyst with research firm IDC.

“If push comes to shove, 25% on a $1,000 phone is not a joking matter, regardless if Apple absorbs some of that or if it’s largely passed onto the consumer.”

Trump said the tariff level could either be 10% or 25%, telling the Wall Street Journal earlier this week: “I can make it 10%, and people could stand that very easily.”

He wants Apple (AAPL) to build and manufacture iPhones in the United States. But moving a complex, global supply chain from Asia is extremely difficult and highly unlikely.

Even if it could be done, costlier American labor and production facilities would seriously jack up the iPhone’s cost, according to Tim Bajarin, president of Creative Solutions.

“If they did make the smartphones in the US, it would add somewhere between 20% to 35% more to the final consumer prices of the phones sold to the public,” he said.

At the top end of Bajarin’s range, that would be an extra $350 on the basic iPhone Xs. That means it would be more expensive to move iPhone production to the United States, than to absorb the tariffs Trump is threatening.

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