Trump Meets With Apple's CEO
Over the past weekend, Apple CEO Tim Cook and President Trump met to discuss how tariffs will begin to affect the Cupertino, California-based company. They met for dinner on Friday while the president was at his golf club in Bedminster, New Jersey.
Tim Cook voiced his concerns about how the tariffs will put Apple at a disadvantage with one of its prime competitors, Samsung Electronics. Samsung’s products won’t be affected by the U.S.-China tariffs.
Samsung doesn’t solely build its products in one country. Instead, its products get built across several countries including Vietnam, South Korea, and China. The company wouldn’t be significantly impacted by the tariffs since the majority of its products aren’t coming from China.
That isn’t the case for Apple. Most of Apple’s devices are made in China before the company imports them to the U.S. and other locations across the globe. The majority of Apple’s products will be inflicted with 10% tariffs in the coming weeks and months. The company’s Apple Watch, AirPods, HomePod, and many other accessories will begin to endure tariffs on September 1.
A Brief Delay on Tariffs for Certain Items
Last week, Trump’s administration announced that there will be a delay on the tariffs against China on cell phones, laptop computers, toys, and some other items until December 15.
Having a delay would soften the blow for companies like Apple, but it’s only temporary. It’s hard to say what will happen in the next few months. Cell phones and laptops alone represent about $80 billion of tariffs that were going to be in effect on the September 1 date. Now, it’s a waiting game.
The office of the U.S. Trade Representative (USTR) announced last week that there will be some products that will be completely removed from the tariff list because of health, safety, national security, and other factors. These items were listed in detail from the USTR’s office last week.
It seems as if Trump walked away from the meeting with Apple’s CEO a little more enlightened on how his tariffs could affect the U.S. economy and U.S.-based companies. Trump said Cook made a “good case” about how it would become difficult to compete with Samsung if Apple’s products were given import tariffs. Trump said:
I thought he made a very compelling argument. It’s tough for Apple to pay tariffs if it’s competing with a very good company that’s not.
In the long term, if Apple is inflicted with import tariffs, that would mean the company will have to incorporate the cost of the tariffs into the cost of goods, which would raise the price of Apple’s products, while Samsung wouldn’t have to consider that at all.
Smartphones already carry an expensive price tag; I can’t imagine it getting more expensive because companies like Apple will have to incorporate the cost of tariffs, while Samsung could continue with its retail pricing.
Last week, when Trump announced that there will be a delay on certain items, the stock market rose. The Dow Jones Industrial Average was up more than 400 points in the morning trade on Tuesday, and Apple was surging more than 4.5% on the news that some of its staple items like its iPhone won’t have to endure any tariffs — at least not until December.
Trump’s meeting with Apple’s CEO over the weekend could help push Trump and his administration to continue negotiations with China. There is an expected visit from Chinese delegations to Washington in September.
Now that Trump has a different point of view and has listened to what Tim Cook had to say about his company specifically, it might have been just enough to get Trump to work harder at a resolution that would be a little more reasonable, especially for companies like Apple that import products from China.
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Is the President Feeling the Pressure?
On Sunday, Trump said over Twitter that the two nations are “talking.” He wrote: “We are doing very well with China, and talking!” He later posted:
Our economy is the best in the world, by far. Lowest unemployment ever within almost all categories. Poised for big growth after trade deals are completed. Import prices down, China eating Tariffs. Helping targeted Farmers from big Tariff money coming in. Great future for USA!
Trump loosening his strict views on tariffs and what he expects from China comes at a time when analysts were speculating that the economy could be headed toward a recession. A looming recession wouldn’t be in the president’s favor. It could especially harm his re-election in 2020. Being a president in a time of potential recession or a recession itself is a massive hole to dig out of.
Consumer confidence has dropped 6.4% since July. The Federal Reserve Chairman, Jerome Powell, said, “Weak global growth and trade tensions are having an effect on the U.S. economy.” But then we have Trump and the White House’s chief economic adviser, Larry Kudlow, saying the opposite and defending the president’s use of tariffs on China.
No one likes to admit their idea isn’t working, especially the president. However, I do believe he might be coming around... a little bit. Especially when meeting with the CEO of one of the U.S.’s top tech companies.
The next few months are going to be very important, and the decisions that get made in these months will outline the future of the U.S. economy. Stay prepared, and stay informed.
Until next time,
Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.
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