Trump's 'surprising U-turn': Is exempting iPhones from additional 125% tariffs a US retreat in the trade war?

 

Trump's 'surprising U-turn': Is exempting iPhones from additional 125% tariffs a US retreat in the trade war?

Early Saturday morning (April 12), the US Customs Department quietly released a notice containing the codes or numbers of all the products that were exempted from the 125% tariff or additional tax recently imposed by the Trump administration on goods imported from China to the US.

The code ‘8517.13.00.00’ listed in the note issued by the Customs may not mean anything to most countries in the world, but this code is used for smartphones in the US Customs Department’s list.

And the inclusion of this code in the list means that the US has exempted from the 125% import tax the item that was exported to the US from China the most last year, by value: smartphones.

Apart from smartphones, other electronic devices and products such as semiconductors, solar cells and memory cards have also been exempted from the additional 125% tariff.

A few days ago, US Secretary of Commerce Howard Latnick, while discussing the issue of smartphones and explaining the background of the decision to impose additional tariffs on China in this regard, had said that the aim was to gradually shift the production or manufacturing of iPhones from China to the United States. The announcement of exempting smartphones from the tariff immediately after his statement was a surprising ‘U-turn’.

And what is also surprising is that this move was not announced publicly before.

Most iPhones and related products are manufactured at Apple’s factories in eastern China. The impact of the 125% tariff on them has been felt in Apple stores in the US for the past several weeks.

According to Counterpoint, a global technology market research firm, 80% of Apple’s iPhones sold in the US are made in China.

The company’s profit margin on Apple products is estimated to be between 40 and 60%. That is, if an Apple product is selling for Rs 100 in the market, Apple makes a profit of between Rs 40 and 60.

If smartphones were not exempted from the 125% tariff, the price of a typical iPhone model would likely have increased from $1,000 to $2,000. Apple also had the option to pass on the increased costs resulting from the tariffs to consumers, but in that case the question is, would the rest of the world have accepted Trump's decision to pay the additional taxes imposed from their own pockets?

Although public price changes or major price increases for iPhones have been prevented for now, price changes are still possible because the Trump administration’s decision to impose 20 percent tariffs on China remains in place and smartphones are not exempted from it.

Apple CEO Tim Cook is a key figure in this whole matter. And he can talk and meet with both US President Donald Trump and Chinese President Xi Jinping in this regard. It would not be surprising if Tim Cook is used to mediate in the future to establish peace in the trade war between the US and China.

And this peace effort in the trade war will be based on Tim Cook’s large and fundamental role in keeping the US and Chinese economies connected. Tim Cook was selected as Apple’s CEO by Apple co-founder Steve Jobs based on his unparalleled expertise in supply logistics.

"The story of taking back our decisions"

The trade war is now moving at a rapid pace. Reports in the US press over the past two days have claimed that Trump's trade adviser, Pat Navarro, has also been sidelined in the White House.

Pat Navarro is in fact the central figure in the matter of imposing all tariffs on several countries around the world.

And his replacement, US Secretary of State Scott Besant, is now leading the negotiations with US trading partners in this regard. He is busy with negotiations with those partners who want to continue the 90-day temporary suspension of the application of tariffs beyond that timeframe.

But after the chaos that has continued for the past ten days, a big question arises. What does the US have to offer other countries? The Trump administration is clearly afraid of the reaction of global stock markets to the president's trade plans and questions about the safety of US debt for investors.

In an effort to keep interest rates on bonds from rising to 5 percent, the United States needs to make deals with more new countries.

In fact, Trump’s announcement last weekend of exemptions from tariffs on smartphones and other products is a surprising U-turn.

According to Capital Economics, a quarter of all exports from China to the United States are now exempt from the 125 percent tariff.

Other big winners from the tariff exemptions include Taiwan, Malaysia, Vietnam and Thailand, according to Capital Economics. Taiwan’s exports to the United States are exempted by 64 percent, Malaysia’s by 44 percent, and Vietnam and Thailand’s by 30 percent.

The US has also been granted several exemptions to the 10% universal tariff. These relate to countries that manufacture electronics.

The new tariff is intended to give countries that export a high value of goods to the US but import fewer goods from the US an effective exemption from the universal 10% tariff (via an exemption). For example, Taiwan has a $74 billion trade surplus with the US, and a $124 billion surplus with Vietnam.

This is in stark contrast to the calculations made by Pat Navarro last week.

Meanwhile, the US has a trading ally, the UK, and according to US figures, the UK has a $12 billion trade deficit with the US, meaning the UK imports more goods from the US than it exports to the US.

There is still a 25% tariff on UK car exports to the US. The UK exports the most cars to the US. And the same goes for UK pharmaceuticals.

And now the US is talking to the bond markets and to itself. The rest of the world is waiting to see what happens next.