Could Your IPhone Cost $300 More In The Trump Administration?

If President-elect Donald Trump follows through with sweeping new tariffs on anything made in China, your next iPhone could cost roughly $300 more, economists estimate.

If you love Samsung phones, the price increase probably won’t apply.

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Americans buy about 130 million new smartphones each year, mostly Apple or Samsung devices, making them one of the most commonly purchased technology products.

The potential higher prices on iPhones show the ways policy decisions in Washington could affect you – and how confusing and arbitrary they can be.

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How iPhones skipped Trump tariffs the first time

First, a quick reminder: A tariff is a tax on products that cross the border.

For a simplified example, when Walmart imports bicycles made in Chinese factories into the United States, Walmart (or typically an importer hired by Walmart) pays a tariff to the United States government.

To pay for that tax, Walmart might pay less to the Chinese factory for those bicycles, absorb the cost of that tax itself, raise the price for that bicycle in its stores, or a combination of those three.

Trump and some conservative economists say tariffs don’t increase prices. But economists almost universally say that shoppers wind up paying more for a bicycle as a result of the tariff.

During the first Trump administration, though, Apple CEO Tim Cook helped persuade the White House to skip tariffs on most products the company sells. That included iPhones, the vast majority of which are made in China.

Cook reportedly told White House officials back then that tariffs would raise prices on smartphones, computers and tablets and hurt Apple. The White House appeared to agree. The administration of President Joe Biden largely kept in place the Trump administration’s tariffs.

So while bicycles, luggage and washing machines imported from China had been subject to increased tariffs, iPhones, Mac computers and iPads assembled in Chinese factories have not.

“Consumer electronics were definitely privileged,” under U.S. tariff policies in the Trump and Biden administrations, said Mary E. Lovely, an economist with the Peterson Institute for International Economics. “That shows the Tim Cook effect.”

No one knows what the Trump administration 2.0 will do. But as a candidate, Trump discussed a 10 to 20 percent tariff on goods imported from anywhere and a 60 percent or higher tariff on everything from China.

Calculating that tax isn’t straightforward, but several trade experts said the tariff percentage, if it’s applied to Apple products, could impose a roughly $300 tax on a $1,000 iPhone. A portion of that higher tax would probably show up in the price you pay for iPhones.

Samsung smartphones are mostly made in countries other than China, so the proposed higher tariffs on Chinese imports wouldn’t apply.

Spokespeople for the Trump campaign, Apple and Samsung didn’t respond to requests for comment.

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Maybe it won’t be so bad?

Business leaders generally believe that Trump won’t impose all the tariffs he has discussed and they’re a negotiating strategy. It’s possible that the next White House will again skip tariffs on smartphones, computers and tablets.

Gary Shapiro, the head of the Consumer Technology Association, an industry trade group whose members include Apple and Samsung, said the prior Trump administration listened to manufacturers that said higher tariffs on electronics would hurt consumers.

This time, Shapiro said, “I am optimistic because President Trump is a pragmatist.” (Shapiro also joked that the CTA stood for the “Consumer Tariff Association.”)

Businesses also have adapted to the higher tariffs on many Chinese imports in the past six years. Many companies moved some manufacturing to other countries to avoid higher tariffs on Chinese-made goods.

For example, research led by University of Delaware professor Sheng Lu recently found that more than four out of every 10 American apparel companies in a survey are now importing less than 10 percent of their products from China. In 2018, just 18 percent of U.S. clothing companies were importing such a small percentage from China.

The shift in clothing manufacturing wasn’t only because of tariffs, but Lu told me that avoiding higher tariffs was one reason.

Scott Lincicome, an economist at the libertarian think tank the Cato Institute, doesn’t think Apple would be able to quickly move away from Chinese factories to avoid higher tariffs.

Apple has moved a small chunk of manufacturing in recent years to other countries, including Vietnam and India. But tariffs or no tariffs, Apple is stuck for the foreseeable future in a marriage with Chinese factories, where armies of people and equipment make fleets of Apple devices.

“There isn’t anywhere else to go that has the sheer capacity to satiate demand for all these gizmos,” Lincicome said.

The good news about higher tariffs is that like most taxes, people typically find them painful when they’re new but get used to them, said Alan Deardorff, a professor emeritus at the University of Michigan who specializes in international trade.

He said, though, that your experience with new Trump tariffs might be different. “With a 60 percent tariff, you got to think people will notice,” he said.

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