11:52 GMT +310 December 2019
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    Apple CEO Tim Cook speaks during an announcement of new products at the Apple Worldwide Developers Conference in San Jose, Calif.

    How Trump's Trade War With China Struck the Wrong Target Hitting Apple & Propping Up Samsung

    © AP Photo / Marcio Jose Sanchez
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    On 16 August, US President Donald Trump and Apple CEO Tim Cook held a meeting at the president's golf club in Bedminster, New Jersey. During the dinner, Cook raised the tariff issue, explaining how the US’ technological rivals could capitalise on the Sino-American trade war.

    Donald Trump admitted Sunday that Apple CEO Tim Cook "made a very compelling argument" that the US president's tariffs may backfire on the company's market positions vis-à-vis Samsung, a South Korean multinational tech firm.

    Samsung Electronics has proven to be a worthy adversary to Apple in the smartphone market: In the second quarter of 2019, the South Korean firm's market share was 22.7 percent while the US tech giant accounted just for 10.1 percent, according to Statista. 

    "He made a good case, in that Samsung is their number-one competitor, and Samsung is not paying tariffs because they’re based in South Korea", Trump told reporters commenting on his dinner with Cook. "And I thought he made a very compelling argument, so I’m thinking about it".

    Most Apple products are assembled in China and could therefore be subjected to Trump's additional 10 percent import tariff, which will come into force on 1 September. Although the company's cell phones and personal computers won't be subjected to the new import tax until 15 December due to the holiday shopping season, the Apple Watch and AirPods are likely to be hit.

    Earlier, Trump urged the company to transfer its manufacturing to the US as a way to evade the burden of import taxes.

    “Apple will not be given Tariff waivers, or relief, for Mac Pro parts that are made in China. Make them in the USA, no Tariffs!" the president tweeted in late July.

    ​Will Apple Bring Manufacturing Back to the US?

    Over the past year, Cook has met with Trump at least five times as tensions between Washington and Beijing are growing, triggered by the Sino-American trade war, which is threatening to shatter the company's market positions.

    William Ho, an analyst at 556 Ventures, suggests that this time, Trump appears to be lending his sympathetic ear to the Apple CEO.

    "As Samsung and Apple are long-time global competitors, it’s good positioning of Mr Cook to paint a spectre of lost American leadership in the smartphone and technology race", the analyst says. "It also hits home during the fourth quarter holiday selling season if Apple sales are hampered by these tariffs. It’s a far worse option if the 4Q earnings call blame lack of growth on these tariffs".

    According to Ebong Eka, a tax expert from the US, there are two ways to tackle the problem: either to further delay the import tariffs or move Apple's manufacturing from China to the US.

    "Trump may consider delaying new tariffs to help Apple but it won't be without a price", the tax expert presumes. "I suspect Trump wants Cook to commit to opening a manufacturing plant in the United States to bring jobs to the US and also help him in his 2020 re-election campaign".

    Benjamin Cavender, a principal of the Shanghai-based China Market Research Group, remains sceptical about the possibility of the company's bringing production back to the country: "It is unlikely that Apple brings back high volume manufacturing to the US.  We will likely see more high-margin items produced in the US or items with high tech demand though".

    The principal also warns against leaping to the conclusion that Cook had finally found an argument that Trump considered persuasive.

    "It is nearly impossible to gauge whether President Trump would heed Cook’s suggestions though he should consider the feedback of prominent business leaders who see the negative effects of the trade war impacting their business", Cavender opines.

    Sourabh Gupta, an Asia-Pacific strategic and economic policy specialist, shares a similarly cautious stance saying that regardless of Cook having made a "good case", it is not clear whether Trump still believes that tariffs give him "great" negotiating leverage.

    Gupta underscores that Cook's opinion is spot-on, as "it is American consumers, not Chinese producers and assemblers who disproportionately swallow the cost of tariffs".

    "The 1 September tariffs on Apple Watch and Air-Pods will not be cancelled", he foresees. "But Trump may ask his USTR, Robert Lighthizer, to take another look at these items and see if they can be part of the product exclusions that are currently being considered. Or if these items could be moved to the delayed 15 December list".

    As for the return of Apple production to the US, the economic policy specialist echoed Benjamin Cavender: according to Gupta, it's more likely that the US tech giant "will move on to other competitive assembly-related locations like Vietnam" since "as a general rule, the basic assembly-related tasks will not be re-shored back to America".

    However, ahead of the meeting with Cook, the US president dropped a hint on Twitter that Apple "will be spending vast sums of money in the US".

    ​Although Trump did not provide any details of the tech giant's further US investments, the company's press release published on 15 August revealed that Apple is seeking to create 20,000 new jobs across the country by 2023. It also highlighted that the tech giant had spent $60 billion with US suppliers last year, supporting 450,000 jobs.   

    The views and opinions expressed by the speakers do not necessarily reflect those of Sputnik.

    The views and opinions expressed in the article do not necessarily reflect those of Sputnik.

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    Tim Cook, Donald Trump, US-China trade war, tariffs, high-tech jobs, Samsung, Apple, United States
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