Trumps announcements of further tariffs targeting China – consumers will feel them

A few days ago the spin doctor Larry Kudlow probably had simply chatted himself away on the TV channel Fox-News: “Both sides will pay and both sides will suffer”. But that’s probably how he hit the nail on the head as a study by Bank Morgan Stanley shows. Until now the tariffs on steel and aluminium have mainly hit the big car companies if you disregard the price increases on refrigerators and washing machines.

Apple, again and again Apple Inc.

This should change drastically if Donald Trump actually implements the tariffs on the remaining Chinese exports of 325 billion dollars as of June 24th. And it would especially affect the pride of the nation the world’s first one trillion dollar company Apple. According to the study the price of a new iPhone would have to rise by 160 dollars. The manufacturing in China is done by the giant company Foxconn and Pegatron at wage costs which existed in the USA 60 years ago.

A relocation to the Asean-States or India would make no sense because of the lack of production experience acquired in China over years by a huge number of industrial workers. Trump’s demand that the products should simply be manufactured in the USA would mean that there would no longer be any customs problems which is clear evidence of Trump’s ignorance of facts.

The reciprocal burden of tariffs is a lose-lose situation.

Sample picture of iPhones.
Photo: Tinh tế Photo – _DSF9422-Edit CC0

Conclusion

It is only a wish of the US President that the Chinese will pay the higher taxes. No it is the importers and consequently the consumers. In terms of stock markets it is a choice between the plague and the cholera. Either import prices rise with the well known consequences for inflation and Fed-Policy – or companies swallow the higher costs and report lower profits. The Apple example is only a particularly drastic one but it is only the beginning.

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