Trump proposes a 100% tariff on chips, offering a potential solution
Apple, the tech giant, has announced plans to hire 20,000 new employees in the USA, primarily for research and development, as the company prepares for potential changes in the electronics industry due to tariff discussions.
The proposed tariffs, if implemented, would primarily affect imported semiconductor chips. These critical components for electronic devices could see a sharp increase in cost, potentially leading to higher product prices or compressed profit margins.
However, the tariffs could also create opportunities for companies investing in chip production within the USA. Exemptions for such investments aim to encourage firms to build or expand domestic semiconductor manufacturing capacity. Apple's CEO, Tim Cook, has announced plans to increase US manufacturing investment by $100 billion, likely to leverage these exemptions.
The tariffs could also motivate electronics companies to diversify or localize their supply chains away from imports towards domestic production. This shift could improve US chip supply chain security but may initially increase costs until domestic capacity scales.
If electronic component costs rise, businesses may pass some costs onto consumers, leading to higher device prices. Analyses of potential tariffs show increased prices and real income losses for US households.
The tariffs stem from a Section 232 investigation focused on national security and supply chain resilience, indicating the US government’s strategic goal to reduce dependency on foreign chip imports and build domestic chip production.
Industry experts, however, are skeptical about the feasibility of significantly shifting Apple's value chain to the USA due to decades of supply chain shifts to Asia. Trump has threatened these tariffs for some time, and it was not ruled out that they could affect all semiconductors not produced in the USA.
Apple has recently expanded production to India and Vietnam due to supply chain disruptions caused by Chinese lockdown measures during the COVID-19 pandemic. Currently, Apple devices like iPads and Mac computers sold in the USA are coming from Vietnam.
The funds for these investments will be used to expand component production over the next four years. Apple CEO Tim Cook presented a round pane of Corning glass with the Apple logo and an inscription to Trump, along with a 24-karat gold stand from Utah, as a symbol of the company's commitment to the USA.
Notably, all iPhones and Apple Watches worldwide will use glass from the USA in the future, with the special glass for the first iPhone in 2007 coming from a Corning factory in Kentucky. Trump believes that subsidies for bringing chip production back to the West, like those used by the previous US President Joe Biden and the EU Commission, are a waste of money, and he sees tariffs as a better solution.
Trump's announcement of tariff exemptions for companies investing in the USA is seen as good news for many large providers. Trump has proposed a way for companies to bypass these tariffs: by investing in the USA and deciding to produce components there. Trump has threatened a 100% tariff on chip imports to the USA and has announced that Apple is "coming back to America" based on Cook's investment promises.
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- Variations in policy-and-legislation, specifically tariffs on imported semiconductor chips, could impact Apple's business as the tech giant prepares for potential changes in the electronics industry.
- Apple's CEO, Tim Cook, has announced plans to increase US manufacturing investment by $100 billion, aiming to take advantage of tariff exemptions for firms investing in domestic semiconductor manufacturing.
- The tariffs could result in increased costs for electronic devices leading to higher prices for consumers, potentially causing real income losses for US households, according to analyses.
- Politics plays a role in the ongoing discussions on tariffs as Trump has threatened a 100% tariff on chip imports and has announced that Apple is "coming back to America" based on Cook's investment promises.
