China trade tariffs a “tax on consumers”, says Apple CEO

China trade tariffs a “tax on consumers”, says Apple CEO

Apple CEO Tim Cook has slammed the escalating trade war between China and the US as a “tax on the consumer”.

In an earnings call to analysts on Apple’s record results, Cook said, “Our view on tariffs is that they show up as a tax on the consumer and wind up resulting in lower economic growth and sometimes can bring about the significant risk of unintended consequences.”

His comments were made in response to a question about the deteriorating relationship between the US and China, and how this may affect Apple’s business in either country. The company has experienced four quarters of double-digit growth in the Greater China region.

Cook acknowledged that trade agreements between the US and “some major economies” are “complex” and “in need of modernising”, but added, “We think that in the vast majority of situations that tariffs are not the approach to doing that, and so we’re encouraging dialogue.”

Future impacts

So far, none of the tariffs imposed by the US on Chinese goods have affected Apple’s products directly, said Cook. However, he implied that a fourth tranche on imported Chinese goods valued at $200 billion may have a more serious impact on the company.

“Probably like everyone else, we’re evaluating that one and we’ll be sharing our views of it with the administration and so forth before the comment period for that one ends,” he said.

“It’s actually a tedious process in going through it because you not only have to analyse the revenue products, which are a bit more straightforward to analyse, but you also have to analyse the purchases that you’re making through other companies that are not related to revenue.

“Maybe they’re related to data centres and this sort of thing, and so we’re going through that now and we’ll be sharing our results later on those, and feeding back public comment.”

These comments almost certainly refer to Apple’s outsourced manufacturing relationships, which are common to nearly all US computer and telecoms hardware manufacturers, including Amazon, Cisco, Dell, Google, Hewlett-Packard, Intel, and Microsoft.

Cook added that the risks associated with “an economic slowdown in one or more countries or currency fluctuations that are related to tariffs” would be difficult to quantify – perhaps the unintended consequences of the trade war that he alluded to previously. Coming from the world’s most valuable company, the remarks will hopefully find sympathetic ears in government.

Despite his comments, Cook added that Apple is hopeful that the dispute will be sorted out in both countries’ interests. “All of this said, we’re optimistic, as I’ve been the whole time, that this will get sorted out because there is an inescapable mutuality between the US and China that serves as a magnet to bring both countries together – that each country can only prosper if the other does. And of course, the world needs both US and China to prosper for the world to do well.

“I can’t predict the future, but I am optimistic that the countries will get through this and we are hoping that calm heads prevail.”

Apple recently launched the China Clean Energy Fund, which will both invest in and develop clean energy projects totalling more than one gigawatt of renewable energy in China, the equivalent of powering nearly one million homes.

For a rundown on Apple’s latest Q3 results, please see our separate report.

Internet of Business says

The law of unintended consequences is certainly a factor in the increasingly hostile trade dispute, as our recent analysis on the potential damage to the technology sector explores.

A risky devaluation of China’s currency may, counter-intuitively, give China an edge in the dispute, by counteracting the tariffs’ impact and making its exports cheaper.

Meanwhile, the hostility of the US administration to Europe’s trade practices, among others, may push some of the country’s allies closer to Beijing.

That said, the US economy remains one and a half times larger than China’s, and despite its vast population – four times that of the US – China can’t afford to lose the US market for its goods. But equally, US companies can’t afford to lose access to 1.4 billion Chinese consumers, not to mention the enormous partnership opportunities with Chinese manufacturers and technology companies.

Until “calm heads prevail”, in Cook’s words, a war of attrition seems like the only possible outcome.