While running for president, one of Donald Trump’s campaign promises was that he’d bring manufacturing jobs to the United States. One way: Force Apple to make iPhones in the U.S.
The Cupertino, California-based company mostly depends on Foxconn in China to assemble its smartphones. So, by Trump’s logic, slapping on a 45% tariff on Chinese goods would make the U.S. a more attractive place for Apple to produce its devices.
The one flaw in this foolproof strategy? Apple can easily avoid taking the hit from Trump’s China tariff by moving production to another country—one even cheaper than China.
“This plan is so ill-thought-out that there are plenty of other places that smartphones can be manufactured,” says Tim Coulling, a senior analyst at Canalys. “In fact, China now, in terms of manufacturing electronics, is on the expensive side, so production could easily go another country that just isn’t China.”
Apple’s iPhone maker already made inroads into the country. In May this year, Foxconn acquired Microsoft’s smartphone facility in Vietnam through its subsidiary FIH Mobile. Foxconn’s iPhone factory in Shenzhen, southern China, can easily move part of its assembly lines further south to make Apple’s smartphones in Vietnam.
Some of Apple’s suppliers like LG Innotek and LG Display, which supplies camera modules and display panels for iPhones, already have factories in Vietnam, making Apple’s potential move to the country even less troublesome as there are less supply chain issues.
Other countries in the cross hairs?
Though Trump’s tariff plan is for Chinese goods, other countries might also find themselves in the cross hairs. “Trump will impose countervailing tariffs not just on China, but on any American trade partner that cheats on its trade deals using practices such as currency manipulation and illegal export subsidies,” John Navarro, policy advisor to the Donald Trump campaign, explained in an op-ed in the Los Angeles Times in July.
Navarro, an economics professor at UC Irvine, said tariffs could be imposed to defend against unfair trade practices, such as undercutting foreign manufacturers, illegal export subsidies and currency manipulation.
“For example, China’s central bank keeps the yuan undervalued, thereby over-stimulating their exports while discouraging U.S. exports to China,” he said. “Such blatant currency manipulation contributes significantly to a $365-billion trade deficit last year with China that would not exist in a freely floating exchange rate world.”
Vietnam, however, does not meet Trump’s tariff criteria. Figures from the U.S. government show the Southeast Asian country’s trade deficit last year was $30.9 billion, and most were for clothing and agriculture.
An alternative to tariffs
Instead of trying to punish Apple for manufacturing abroad, Trump has another option to persuade the company to invest at home and create jobs—tax cuts.
Trump has proposed slashing the tax on repatriated profits from 35% to just 10%, making Apple one of its biggest beneficiaries as it holds about $200 billion overseas. This is part of Trump’s wider plans to reduce the corporate tax rate from 35%, the highest in the developed world, to 15%, almost as low as tax havens like Hong Kong.
But Trump getting Apple to finally make America’s most popular gadget in the country would mean more than just jobs. Not only is Apple the world’s most valuable company, but President Barack Obama also tried to get the tech giant to produce iPhones in the country during his tenure. In 2011, the U.S. President asked the late Steve Jobs what would it take for the company to make iPhones in the country. The Apple CEO replied: “Those jobs aren’t coming back.”
So while neither might convince Apple to move manufacturing back to the U.S., tax cuts are the better bet. They’ll at least make America more business-friendly, instead of setting off a trade war.
“There isn’t much Trump can do if [Apples moves] to outside China,” says Coulling. “What’s he going to do? Put a tariff on Apple products?”