Apple will start moving the manufacturing of iPhones for sale in the United States away from China as soon as next year, according to the Financial Times.
The tech giant has invested billions in the People’s Republic over the last two decades, and it is estimated that 90 per cent of iPhones undergo final assembly there. But President Trump’s tariff onslaught against China, which he sees as America’s major strategic and economic rival, is forcing Apple to review its operations.
Although smartphones have been given a temporary reprieve from swingeing import duties, Apple has to deal with not only the tariff on the finished product but also any charges on its extended supply chain, and Washington has indicated it intends to target semiconductors, among other components.
Superficially, it is easy to see this as a victory and vindication for Trump. Manufacturing moving elsewhere is A Bad Thing for China, which, in his simplistic and Manichaean world, must be A Good Thing for the United States. Doubtless, Maga acolytes will be queueing up to sing paeans to this tough and shrewd commercial victory for the God-Emperor.
It is certainly a blow for China in economic terms to lose Apple’s investment and capacity. But we need to think about this a little more carefully before watching President Trump’s victory lap.
Earlier this month, Howard Lutnick, the US commerce secretary, was bullish about the potential gains from tariffs on China. “The army of millions and millions of human beings screwing in little screws to make iPhones – that kind of thing is going to come to America,” he declared.
This was reinforced by the unblinkingly confident White House press secretary, Karoline Leavitt. “President Trump has made it clear America cannot rely on China to manufacture critical technologies such as semiconductors, chips, smartphones and laptops. At the direction of the President, these companies are hustling to onshore their manufacturing in the United States as soon as possible.”
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This White House psychodrama cannot last
Read MoreThat is not what is happening. Although Apple has increased its investment in the United States, the FT reports the company is moving the assembly of iPhones from China to India, with the ambition of supplying the more than 60 million devices sold in America every year wholly from its Indian partners by the end of 2026.
In any event, diversifying away from China has been on Apple’s agenda for more than a decade; but Eli Friedman, who sat on the company’s academic advisory board from 2012 to 2015, described the idea that the assembly of iPhones would be relocated to the United States as “pure fantasy”.
What are the real-world effects of Apple’s decision likely to be? The company’s market value dropped by $700bn when Trump unveiled the new tariff regime at the beginning of April, and it is hard to imagine that even this President could interpret that kind of setback for an American company as a victory.
Prices will almost inevitably rise, but, unlike the tariff fantasy in Trump’s mind, this cost will be borne by consumers, all the more so because Apple users are doggedly brand loyal. The trade stand-off between the United States and China has intensified, and Trump’s Treasury secretary, Scott Bessent, has said that a full-blown trade war would be “unsustainable”. It would damage growth across the globe and risk fuelling inflation.
President Trump may claim a psychological victory, but there is no guarantee that America would derive any benefit from a commercial conflict even if it was damaging for China. Beijing has a higher pain threshold. If winners are hard to identify, it is very easy to see who loses: the US consumer, faced with higher prices and lower economic growth. Is this making America great again?
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