Donald Trump Doesn’t Understand Apple Already Manufactures In The US
Donald Trump is insisting that Apple should move its manufacturing over to the United States. The problem with this being that Donald Trump doesn’t seem to understand that Apple already does its manufacturing in the United States. Calling for Apple to do what Apple already does isn’t all that useful. What’s being missed is that Apple only assembles equipment in China. And that’s of trivial value so we don’t care where it is done:
Donald Trump tweeted on Saturday that Apple should make products in the United States if it wants to avoid tariffs on Chinese imports.
The company told trade officials in a letter on Friday that the proposed tariffs would affect prices for a “wide range” of Apple products, including its watch.
Apple’s AirPods headphones, some of its Beats headphones and its new HomePod smart speaker would also face levies if the current package of $200bn in tariffs goes ahead as expected in the coming days.
The usual point of trade is to make us better off. So, if having tariffs to block trade makes us worse off – which is what price rises do – then why are we having tariffs? Well, the correct answer is because the President of the United States doesn’t understand this.
Apple prices may increase because of the massive Tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive. Make your products in the United States instead of China. Start building new plants now. Exciting! #MAGA
— Donald J. Trump (@realDonaldTrump) September 8, 2018
But why would we want to do that?
The thing is that Apple already, pretty much, makes things in the US. What it doesn’t do is assemble them there. So, take an iPhone, say it costs $800. About 40% of that – $320 – is pure profit to the company. That’s added in Cupertino in California – yes, the recent tax changes mean that it is, not Bermuda, not Ireland. The expensive parts of the kit itself are the processors and the screens. The screens are made in Taiwan or Japan and no one else in the world knows how to make them – not even Apple. The processors are made in Texas.
All that’s left is the cheap stuff – a few wires etc – and the assembly. And we know how much that costs, about $10 per iPhone. And that’s the bit that’s done in China too. In terms of who adds the value and where then Apple already manufactures in the US. The only bit that’s done in China is that $10 worth of sticking it altogether. And why would we care at all where $10 of an $800 piece of kit is done?
As we started out saying Donald Trump doesn’t understand trade. His ideas about Apple just show this.
Posted: 10th, September 2018 | In: Key Posts, News, Politicians, Technology Comment | TrackBack | Permalink
