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The Potential Effects of China and America Trade War on Apple

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Apple is a very successful company mainly known for its computers (Mac Book), phones (iPhones), and Tablets (iPad). This company, which was created in the United States, has done an incredible job with globalization. Currently, the company runs a multinational operation. Apple has its headquarters in Silicon Valley, California, and mainly all of the designs for its products are made in the same headquarters in California. Apple’s iPhone is one of the most compelling shopper electronic items at any point made. It has advanced under the control of individuals from all over the globe. Today, there are at present more than 700 million iPhones being used around the world (Reisinger, 2017).

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The company was able to develop globalization very quick because when its first product was released, which was the personal computer, it was very innovative, and it made a breakthrough. This led to getting the attention of many wealthy investors very quick, and gave the chance to get the company public. Thanks to globalization, Apple increased its profits, and has internet sales to more than 39 countries, and also has over 450 retail stores. One of the main strategies that has made the company successful is that it does not concentrate in only one particular line of product. Instead, the company has dedicated to “a little bit of everything”, that is why they are so successful. Its current CEO, Tim Cook, announced on August 2, 2018 “The company hit a $1trillion market capitalization 42 years after Apple was founded and 117 years after US Steel became the first company to be valued at $1billion in 1901.”

Apple is the most valuable company in the world, and it has much at stake if it was dragged into the trade war between the United States and China. If the company gets dragged into trade war between two of the largest economies in the world (China vs United States) it could potentially destroy the company, and the results would be disastrous. If the United States and China go to trade war against each other there will be high tariffs in the trading of their products, and potential trade barriers could be set between these two countries. Both countries will be affected in a big way; Especially the company mentioned. China doesn’t only obtain one of Apple’s biggest markets, it also contains a substantial amount of the prime manufacturing base of Apple products like the MacBook, iPhone, and iPad. Not only that, “Revenue from the Greater China market, which includes Hong Kong and Taiwan, made up 20 percent of Apple’s total revenue of US$229.2 billion in its financial year ended September 30, according to the company’s latest annual report”. This are very significant numbers for a company this big. When it comes to profits, Greater China is also accounted for almost 22% of Apple’s total operating profit in the last year. With all this information said, it could be inferred that Apple is very co-dependent of China to keep moving forward as a company.

Manufacturing is a very important thing for every big technology company, and Apple is no exception. According to The China Morning Post, Apple, in it’s latest annual report stated that a substantial amount of its hardware products “are currently manufactured by outsourcing partners that are located primarily in Asia, with some Mac computers manufactured in the US and Ireland”. Not only Apple’s economic well being could be at stake, but also many of the host country’s (China) small businesses could be potentially losing money. According to The China Morning Post, There are more than seven “publicly listed suppliers in mainland China and Hong Kong that each have more than 10 percent of their revenues tied to providing components to Apple”. These types of components include batteries, speakers, microphones, and other products for optical imaging.

There are many big companies that would be affected if China and the United States go to a trade war, but in this situation the most affected company would be Foxconn Technology Group, which is in Taiwan. It is also Apple’s biggest ODM ( Original Design Manufacturer). According to Forbes “Foxconn specializes in the manufacturing of smartphones, PCs, servers, power supplies, and connectors. In addition to Apple, its top 5 customers include Dell, HP Inc., Samsung, and LG. You’ve likely used a Foxconn-manufactured product—its repertoire includes iPhones, iPods, iPads, and the Apple Watch.”. The main products that they manufacture are Apple products. With this said, the company would lose their main client, if Apple were to retire from China, and change its manufacturer.“The company has to be applauded for providing so much economic opportunity for 250,000 of its workers, but it’s not without controversy. It has suffered from allegations of poor working conditions, with long working hours. In 2010, 14 Foxconn employees committed suicide, a spate that was attributed to at the company’s high-pressure, exploitative work environment”. This is just one example of only one company that would be affected if Apple were to be dragged into the trade war of the United States vs. China.

This trade war that the united States started with China could affect a lot of businesses, and it is very dangerous because it is two of the largest economies in the world imposing tariffs each other, and raising prices on goods. According to BBC “So far, the US has imposed tariffs on more than $360 billion (£296 billion) of Chinese goods, and China has retaliated with tariffs on more than $110billion of US products.” Even though prices have been raised in pretty much all imported goods, smartphones prices have still not been raised but according to The Washington Post, President Donald Trump tweeted — of course — that the U.S. plans to impose a 10% tariff on the remaining $300 billion worth of goods imported from China. Smartphones are among the consumer products that haven’t been subject to earlier tariff rounds, but it’s fair to assume they will be if the U.S. moves ahead with duties on all remaining Chinese imports.” After President Trump tweeted that statement, the stock went down by 2%, This means that the trade war will continue, and the prices for smartphones will potentially be raised due to the tariffs. This can affect Apple in a big way, and maybe they will have to do a restructure, and find a new location to manufacture its products  

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