in this video we're gonna be talking about what tariffs are how they work and
how Trump's tariffs are going to in already are affecting Apple have you
ever wondered why Apple devices like iPhones and Mac books cost more in other
countries around the world like Germany Mexico or India
well that's because those countries imposed tariffs on goods from other
countries like China and the USA let's say India imposes a 10% tariff on China
and a consumer in India decides to buy a $1000 iPhone which is manufactured in
China the consumer would have to pay $1100 for the iPhone with the extra $100
going to the Indian government this move is good for India for a couple of
reasons first off it'll help bring in extra revenue but much more importantly
it'll encourage companies to manufacture their products inside of India
so that Indian consumers don't have to pay those tariffs now here's the kicker
that's exactly what Apple is doing right now
Apple supplier company wished Iran has already been making the iPhone SC in
iPhone 6s from within India for a couple of years now completely avoiding the
import tariffs on those iPhone models being purchased by Indian consumers this
is great for both India and Apple because it provides jobs for Indian
citizens boosting the Indian economy and it means more iPhone sales for Apple
since Indian consumers can more easily afford them
now that the tariffs are out of the way and this leads us into the us-china
trade war and how Apple got stuck in the middle for years even before he became
president of the United States Donald Trump has been complaining about China
and their unfair practices like in 2011 when Trump said that China exported more
goods to the US than they purchased which he claimed was unfair because it's
better for their economy and worse for ours for example a report came out in
2014 claiming that the United States lost 32 million jobs since 2001 due to
outsourcing to China so why were we outsourcing to China
well because labor wages in the other costs and China are many times cheaper
than wages in the United States Apple has been doing this for years and
selling their devices virtually tariff-free this was great for both
Apple and China so they've now got a flood of new factories in their country
filled with Chinese workers boosting their economy even though labor rates
were that low however it wasn't so good for the US
since all those factories could have been made in the United States and bring
thousands of jobs ever says Trump was elected in 2016
he's been trying to get US companies to come back and invest here in a number of
ways one way that seems to have worked is lowering taxes on offshore profit
brought back into the United States from 35% down to 15% which basically meant
that if a u.s. corporation profited 1 billion dollars in China they would have
to pay 350 million dollars to the US government just to bring that money back
into the US and spend it here with the offshore tax now down companies
substance brought back four times as much money in one year six hundred sixty
five billion dollars in 2018 compared to only 150 five billion dollars in 2017 an
apple alone will bring in and spend three hundred and fifty billion dollars
over the next five years thanks to that drop in the tax rate now
let's get to Trump's other tactic tariffs and how they affect Apple just a
few days ago Trump announced a ten percent tariff on virtually everything
that's imported from China including Apple's iPhones and most other devices
and accessories and right after the announcement Apple stock value dropped
by over five percent now if the tariffs go through starting on September first
which is by the way only a couple of weeks before they announce to 2019
iPhones then Apple will have a couple of choices either they keep price is the
same and US consumers will end up paying more for future iPhones or in the worst
case scenario switch to another smartphone brand like Samsung because
iPhones are going to be more expensive on the other hand Apple could take the
loss themselves lowering the price of their iPhone so that we the consumers
will still end up paying the same amount as before it's been estimated that if
Apple absorbs the tariffs their revenue would fall by 4 percent in 2020 which
could translate into several billion dollars of lost profits which is very
bad news for investors in the main reason why their stock value dropped
over five percent after the announcement if that's the case US consumers won't
really have much to worry about since iPhone prices will stay the same
but either way tariffs are bad news for Apple in one scenario their prices go up
and sales go down or in another prices stay the same but profits go down so
what options does Apple have well since we don't know if these
tariffs are going to be temporary or long-term Apple should most likely just
absorb the terrace for now until we find out what's going to happen in the long
term and if the us-china trade war keeps escalating there's a chance that Apple
might end up leaving China and move its factories elsewhere Trump would prefer
that Apple moves their manufacturing to the United States but seeing as labor
rates are so high I don't see that happening anytime soon
unless the US government offers Apple some incentives Apple has actually tried
that in the past with the Mac Pro in 2013 investing over 100 million dollars
to kick-start US manufacturing in Austin Texas but it ended up not working out
because of higher labor rates in the lack of enough people with the skills
needed for modern manufacturing processes which is thriving in China and
there's now the new 2019 Mac Pro coming this fall and Apple has already
announced that it will in fact be manufactured in China however Apple has
another option available if things don't go well in China with the trade war and
that's India Apple already has two factories making their products in India
the wished Iran plant in the Foxconn plant which will begin mass production
of higher-end iPhone models this year those existing plants will make it
easier for Apple to move the rest of their production over to India if they
so choose along with lower labor rates which are actually lower than the rates
in China and India is currently on pace to overtake China as the world's most
populated country and has been booming as far as tech now we're not sure which
path Apple's gonna take but for now Apple is gonna have to deal with those
China tariffs on the plus-side Apple services revenue has been
skyrocketing for the past few years allowing them to fall back on that
instead of product sales which I've recently been going down due to market
saturation if you enjoy this video make sure to tap that like button and click
the circle above to subscribe and check out that video to see why Apple MacBooks
are so expensive thanks for watching and we'll see you in the next video
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