Apple iPhone X sales have been less than expected, thanks to the rocket high price of the phone. Thus, for 2018 rumors are that the new iPhone X version would be more affordable. But, considering the ongoing U.S.-China trade war, buyers waiting for Apple to lower the new iPhone X price may be up for some disappointment.
U.S.-China trade war – how it may affect new iPhone X price
Reports are that the cheapest new iPhone would cost anywhere from $599 to $799. The updated version of the new iPhone X is expected to retail for $899, while the Plus version would cost $999. Everything said in these reports looked a close possibility unless President Donald Trump waged a trade war with China.
Though it is not the first such battle that Trump has started, the impact of a trade war with China will be felt by many companies including Apple. A recent report from the Wall Street Journal says that the U.S.-China trade war might lead to double taxation on the iPhone. And, Apple would either have to bear the increased cost, or pass on the extra burden to the consumers. A 10% tariff on the iPhone X would add $37 to the import cost of $368, notes the WSJ.
Though Trump has assured that the iPhone will be excluded from the list of products qualifying for the import tariff, it could change in the future. So far, smartphones have been excluded from such list, but Trump lately has been talking about levying tariffs on a total of $500 billion in imports, which would include all the items that China ships to the U.S.
What can Beijing do?
Beijing might look to exercise its influence on the U.S. companies operating in China as the trade war intensifies. China, in response, has the option to slap import duties on the America companies, and Apple would most likely be the biggest victim as the company accounts for 9% of the Chinese mobile market.
Apple currently operates about 40 retail stores in China, and about 20% of the firm’s revenue comes from the region. So, while Trump calmed nerves by saying that Apple has nothing to worry about, the Chinese government could interfere with the supplies of parts and labor, hitting Apple indirectly.
Unlike other big U.S. tech companies, Apple is directly exposed to the current conditions. And, such a situation could leave Apple investors on edge resulting in the stock taking a beating. Meanwhile, investors are shrugging off the U.S.-China trade war worries as Apple shares continue to move north ahead of the earnings announcement on July 31. In the last three months, the stock is up almost 18%.
Not just Apple
Following the U.S.-China trade war, the Chinese economy is already exhibiting cracks, with a slowing manufacturing sector and their stock market in a downward spiral. In a statement earlier this month, Statistics authority spokesman, Mao Shengyong, said that the country faced “extremely complicated and severe” domestic and external conditions in the first half of the year.
However, China is not the only party that would bear the brunt of the U.S.-China trade war. The rising tension could spell mayhem for American workers, the U.S.-based companies, and economies across the globe. China is the world’s second-largest economy and the world’s largest when measured on the basis of purchasing power parity. The country is also a top trading partner with almost every country across the globe.
“If the market were to conclude that trade wars were causing significant stress in an economy of that size I think risk appetite globally would dry up pretty quickly,” James Barrineau, head of emerging markets debt at Schroders, told Yahoo Finance in a phone interview.
Such a situation would be risky for U.S. stock markets and financial assets, considering the benchmark S&P 500 index is trading at historically high levels. According to the International Monetary Fund, since the U.S. has also threatened tariffs on other major economies like the European Union, Canada, Mexico and Japan, it would be hit harder than other countries.
“As the focus of global retaliation, the United States finds a relatively high share of its exports taxed in global markets in such a broader trade conflict, and it is therefore especially vulnerable,” said IMF chief economist, Maury Obstfeld, according to Yahoo Finance.