Why your next mobile phone could be more expensive ...Middle East

Prepare to pay a lot more for your next mobile phone if the US and China refuse to end their trade war.

The latest escalation has placed consumer electronics, including smartphones, at the centre of the dispute, with experts warning that new tariffs and export controls could send prices soaring.

After the US imposed a 10 per cent tariff on all Chinese imports, Beijing retaliated by imposing levies on key American exports, including coal and crude oil.

These controls, which take effect on 10 February, will not only disrupt manufacturing and supply chains but could also drive up costs for tech companies and, by extension, consumers.

China’s Ministry of Commerce also announced export controls on rare metals, some of which are key components in electronics, including smartphones. These measures are effective immediately.

“With these tariffs, American consumers will pay the price, and they are also going to hurt American businesses,” said Şebnem Kalemli-Özcan, a professor of economics at Brown University. “When a good is more expensive for a company to buy, the company is going to sell it for more to the consumer.”

Tech giant Apple’s stock has already tumbled 4 per cent in response to the latest trade measures, with analysts predicting that price hikes could soon follow.

Apple is caught in the middle of the latest trade battle, with its iPhones assembled in China and shipped to the US accounting for roughly a third of its annual sales, according to USB.

Gene Munster, managing partner at Deepwater Asset Management, said tariffs on iPhones could have a 4 per cent impact on Apple’s earnings. He predicts that the first affected products are likely to be Apple Watches manufactured in China and exported to the US.

However, many investors remain convinced that Apple will once again secure an exemption from the tariffs.

During Trump’s first term, Apple’s chief executive, Tim Cook, personally lobbied the former president to shield Apple from previous rounds of tariffs, reportedly arguing that they would disadvantage the company against South Korea’s Samsung. Trump relented, granting exemptions after private appeals from Cook.

This time, the Apple chief appears to be employing a similar strategy. Cook reportedly donated $1 million (£800,000) to Trump’s inaugural fund, according to Axios, and has spent years cultivating a close relationship with him through carefully staged meetings and dinners. Trump, for his part, has publicly praised Cook’s influence: “That’s why he’s a great executive — because he calls me and others don’t.”

However, analysts suggest that any new exemption may come with conditions. Trump has long pushed for Apple to manufacture more products in the US, and any shift towards domestic production would inevitably drive up costs due to higher American labour expenses.

China’s rare earth metals

China has announced new restrictions on exporting 25 critical metals used in electronics such as smartphones and laptops, including tungsten, ruthenium, molybdenum, and tellurium.

China dominates refinement of such metals, producing almost 90 per cent of global output.

Tungsten, one of the rarest elements on Earth, is used in aerospace components, wear-resistant metals, and the tiny motors that generate vibrations when a smartphone receives a call or message. The majority of the world’s tungsten is mined and processed in China.

Ruthenium is used in chips and is a key component in Apple’s Lightning phone connectors, while molybdenum is used in high-performance electronics.

Dr Sami Bensassi of Birmingham Business School says that China had already effectively cut off direct shipments of these rare minerals to the US.

“The Chinese government is no longer issuing licences to export these materials to the US,” he said. “Even sending them to third-party countries that will incorporate them into products destined for the US is now restricted.”

Dr Bensassi added that China’s policies were designed to reinforce its dominance in battery production and other key technological components – which makes it more difficult for Apple to re-route its supply chain through other countries, rather than China.

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Apple has already been attempting to shift parts of its production out of China to countries such as India, Vietnam, and Malaysia.

Bank of America Securities said ramping up iPhone manufacturing in India could help limit the consequences of the tariffs.

“Most iPhone models can now be manufactured in India,” said Wamsi Mohan, an analyst at Bank of America Securities. “As the new tariff is imposed on imports from China, Apple could have its manufacturing partners increase production in India and ship to the US.”

However, India itself may soon face additional US tariffs, complicating Apple’s efforts to move its supply chain elsewhere.

Furthermore, China’s restrictions on rare metals will make it costly and difficult for any country to replace its role in global electronics manufacturing.

Dr Bensassi argues that while the impact of China’s export controls may be limited because many have already been implemented, the new US tariffs will hit consumers the hardest.

Even if Apple secures an exemption, Dr Bensassi warns, the company may still raise prices and attribute the increase to tariffs.

“The trick is that consumers wouldn’t know the price without the tariffs for the next iPhone model,” he explains.

“Apple could also accelerate the release of its next generation of products and price them higher, using the uncertainty around trade policies to justify the hike.”

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