Proposed new U.S. trade tariffs could see Apple increase iPhone pricing by 14 percent, with the Office of U.S. Trade Representative beginning the approval process this week to impose additional import taxes on Chinese-made products.
The move comes after the U.S. raised import taxes on Friday from 10 percent to 25 percent on all Apple accessories such as power adapters, cables, and cases which are produced in China and then imported into the United States. – Apple has so far absorbed the cost of this tax without increasing prices for consumers.
There are a variety of ways Apple could handle the impact, though J.P. Morgan warn a 14% increase is expected if the White House implements a 25 percent tax on Chinese imports.
Asides from increasing the price of its handsets, which J.P. Morgan’s estimates suggests would see the price of the entry level iPhone XS increase from $1,000 to $1,142, Apple could absorb the tariffs themselves, or work with suppliers to negotiate better component pricing to help reduce the overall production cost of the handsets, thus reducing the amount taxed for each iPhone imported.
Looking further in the future, some have suggested Apple should move iPhone production to the United States to avoid such tariffs, though analysts warn by doing so the ASP (average selling price) of iPhone could increase by 20%.
We estimate the incremental cost of manufacturing iPhones in the U.S. could be 15-25%, and, if passed on to consumers could lead to demand destruction, in our view,” the Bank of America said in a note.
Only time will tell what route Apple decides to take. The last resort would presumably be passing the cost to consumers due to the negative effect the price increases would have on iPhone sales, though that being said, 14 percent would be a lot for Apple to absorb and most certainly is something they’ll want to avoid at all costs.