Dennis Gorelik (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
dennisgorelik) wrote2025-04-05 06:40 pm
dennisgorelik) wrote2025-04-05 06:40 pm
The impact of Trump tariffs on iPhone price
The reason why Trump has setup tariffs - is because many Trump's constituents - are clueless protectionists who poorly understand how international trade and economics works.
When it comes to supporting people who poorly understand economics, the main thing is declarative support in nice sounding words.
Real tariffs are not necessary for such declarative support.
Therefore, private businesses will be able to bypass most of these tariffs.
An iPhone manufactured in China (a subject to a 34% tariff on Chinese goods) — will instead be imported through Singapore with a 10% tariff.
The iPhone will be shipped as semi-finished components with a total value of $5.
As a result, the import duty (tariff) will be:
$5 * 10% = $0.50 per phone.
In the U.S., the iPhone will be finalized into a finished product: iPhone software will be installed on the semi-finished product, and it will be packaged as an Apple iPhone.
This "assembly" will cost $1 per iPhone.
Another $1 per iPhone will be spent on lobbying politicians to allow such an import scheme.
After that, the 'iPhone assembled in the USA' will be sold for $1,000.
The costs of tariffs, assembly, and lobbying (in the price of an iPhone) will thus amount to:
($0.50 + $1 + $1) / $1,000 = $2.50 / $1,000 = 0.25%
As a result, the iPhone will remain cheap, and protectionists will continue to support Trump.
When it comes to supporting people who poorly understand economics, the main thing is declarative support in nice sounding words.
Real tariffs are not necessary for such declarative support.
Therefore, private businesses will be able to bypass most of these tariffs.
An iPhone manufactured in China (a subject to a 34% tariff on Chinese goods) — will instead be imported through Singapore with a 10% tariff.
The iPhone will be shipped as semi-finished components with a total value of $5.
As a result, the import duty (tariff) will be:
$5 * 10% = $0.50 per phone.
In the U.S., the iPhone will be finalized into a finished product: iPhone software will be installed on the semi-finished product, and it will be packaged as an Apple iPhone.
This "assembly" will cost $1 per iPhone.
Another $1 per iPhone will be spent on lobbying politicians to allow such an import scheme.
After that, the 'iPhone assembled in the USA' will be sold for $1,000.
The costs of tariffs, assembly, and lobbying (in the price of an iPhone) will thus amount to:
($0.50 + $1 + $1) / $1,000 = $2.50 / $1,000 = 0.25%
As a result, the iPhone will remain cheap, and protectionists will continue to support Trump.
It was the same with cars since 90s at least
Re: It was the same with cars since 90s at least
Yes, this is a very similar tool the automotive industry uses - to mitigate tariff's calamity.
But it's usually called "kit car":
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https://www.perplexity.ai/search/what-phrase-is-correct-in-the-2r2GUn5OQG.GqN6CWrJ_jw#0
What phrase is correct in the context of tariff impact minimization: "car kit" or "kit car"
In the context of tariff impact minimization, "kit car" is the correct and widely recognized term. This phrase refers to vehicles assembled from pre-manufactured kits, which can be relevant in trade classifications and tariff strategies. The term "car kit" is less commonly used and typically describes components or accessories for vehicles (e.g., repair kits), not the assembled product itself. When addressing tariffs, businesses might classify or source components related to kit cars to optimize trade agreements or reduce costs.
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no subject
If that's the case, why did U.S. stocks see biggest 2-day wipeout in history? Market makers surely know how international trade and economics works, and they anticipate the impact to be substantially worse than 0.25%.
no subject
Because stock market was overpriced.
The market anticipated optimal economic policy from Trump.
When investors realized that Trump's policy is not going to be optimal economically - investors corrected their market bets to more realistic .
> they anticipate the impact to be substantially worse than 0.25%.
The impact may be worse than 0.25%, because there is price of internal adjustment within the company [in order to minimize tariffs payments].
Furthermore, even 0.25% decline in efficiency of business - has significantly bigger impact on profit, and even bigger impact on the stock price.
no subject
You can't have it both ways. Either companies will be able to easily bypass the tariffs (as you claimed in the post), or tariffs will have significant negative impact (as you claimed later).
no subject
I did NOT claim that bypassing the tariffs will be easy.
Tariffs reduction will be doable, but not easy.
> tariffs will have significant negative impact
Correct. Tariffs will have a significant negative impact.
Even 1% decline in profitability is quite significant.
However this significant negative impact is not going to be disastrous.
no subject
If bypassing tariffs is not going to be easy, then the price of iPhones can be expected to reflect that.
no subject
But not by much.
Even though it's not easy to restructure packaging/assembly/accounting of iPhone -- it's doable and is very scalable.
no subject
This article picked the wrong baseline.
It should have been not the Inauguration day (2025-01-17), but pre-Election day (2024-11-05).
The loss since 2024-11-05 is about 14% drop (from 5782.76 pre-Election
down to 5,074.08 today), not 18% (from 5996.66 Inauguration down to 5,074.08 today).
no subject
The headline I quoted is not based on this comparison. It's hard to ascribe two day drop in the markets on anything other than the tariffs introduced by Trump and their consequences.
no subject
Correct.
I wanted to point out that the overall article is a bit biased toward sensationalism.
> It's hard to ascribe two day drop in the markets on anything other than the tariffs introduced by Trump and their consequences.
The second day drop is, partially, attributed to the announcement of retaliatory tariffs by China.
While this retaliatory tariff announcement is a consequence of Trump tariff, it was hard to predict for sure that China would do a significant retaliatory tariff.
Announcement of retaliatory tariffs by China - was a news by itself - that amplified market losses.