Apple Says US Tariffs on China Would Hit 'Wide Range' of Products

A "wide range" of Apple products including the Apple Watch would be affected by proposed US tariffs on Chinese goods, the company told US trade officials, but gave no sign of an impact on its iPhone cash cow.

Apple did not disclose specific revenues for most of the affected products, but of those the Apple Watch may be the biggest seller. It brought in about $6.1 billion (roughly Rs. 44,000 crores) in revenue last year, according to an estimate from analyst firm Bernstein. That represents a small portion of Apple's $229 billion (roughly Rs. 16.5 lakh crores) in overall sales.

Apple laid out the impact on its products of the Trump administration's proposed tariffs on $200 billion (roughly Rs. 14.4 lakh crores) worth of Chinese goods in an unsigned letter it submitted on Wednesday to US officials as part of a public comment period.

On Friday, US President Donald Trump, speaking aboard Air Force One, said that he has tariffs on an additional $267 billion (roughly Rs.19.2 lakh crores) in Chinese goods "ready to go on short notice if I want."

Cell phones, the biggest US import from China, have so far been spared, but would be hit if Trump activates the new $267 billion tariff list.

AirPods headphones, some of Apple's Beats headphones, and its new HomePod smart speaker also face levies as part of the proposed tariffs on $200 billion worth of Chinese goods, according to the letter submitted on Wednesday.

"Our concern with these tariffs is that the US will be hardest hit, and that will result in lower US growth and competitiveness and higher prices for US consumers," Apple said in the letter.

Apple did not respond to requests for comment.

The letter did not mention the iPhone, which accounted for about two-thirds of Apple's $229 billion in revenue in its most recent fiscal year. The letter also made no mention of the iPad, which brought in $19.2 billion (roughly Rs. 1.38 lakh crores) in sales in the most recent year, or most of its Mac computers, which generated $25.8 billion (roughly Rs. 18.6 lakh crores).

Apple did say its Mac Mini, a low-priced computer that comes without a keyboard or mouse, would be affected.

Many Apple accessories, such as mice, keyboards, chargers and even leather covers for iPhones and iPads would face tariffs, Apple said.

Reuters reported in July that the Apple Watch was likely to be affected by the tariffs.

Shares of Apple closed down 0.8 percent in regular Nasdaq trade on Friday, and slipped another 1 percent in extended trading.

Apple also said that computer parts for its US operations would be hit by the tariffs. The company said that "main logic boards with microprocessing units" could face levies, along with equipment used for research and development.

On Apple's most recent earnings call in July, Chief Executive Officer Tim Cook said the company could face such tariffs "related to data centres."

In its letter, Apple argued that the way US trade officials calculate the US trade balance - attributing the entire value of a product to a country like China where final assembly happens - fails to reflect the true value that Apple generates in the United States. The company noted it spent $50 billion (roughly Rs. 3.60 lakh crores) with 9,000 US suppliers in its most recent fiscal year, including Texas-based chip firm Finisar Corp and Kentucky-based Corning.

"Given the balance of Apple's economic footprint, the burden of the proposed tariffs will fall much more heavily on the United States than on China," Apple said in its letter.

The technology sector is one of the biggest potential losers in the proposed $200 billion tariff list. Fitness tracker maker Fitbit said it would be hit by tariffs, and chipmaker Intel said the levies could slow down the adoption of 5G networks, the next generation of wireless data technology for phones and other devices.

© Thomson Reuters 2018