Trump’s proposed tariffs and what they could mean for the smartphone industry

Reports indicate that Trump wants to slap a 20 percent tariff on all imports and up to a 60 percent tariff on Chinese goods. These tariffs, according to him, will encourage American companies to bring their factories back home. However, whether companies actually do that or not, it’s almost certainly going to mean increased prices for the average consumer.

Most major phone manufacturers — including Samsung, Apple and Google — rely on foreign imports for their products to be made. If Trump’s proposed tariffs go through, Apple and Google will be the most affected out of the three.

Apple heavily relies on Chinese labor and, despite moving some of its operations to India and Vietnam recently, will still feel a heavy blow. However, there is also the possibility that Apple might be exempted from these tariffs like before during Trump’s first term. A few weeks ago Apple CEO Tim Cook called Donald Trump to discuss the difficulties of conducting business in the EU, so it’s very likely that the two might come to an agreement.

Google also relies on Chinese manufacturing for its Pixel phones and might not be as lucky when it comes to getting special favors from the president. Samsung will be the least affected as it shut down its last Chinese factory in 2019. However, the 20 percent tariff still means some trouble, albeit not as much as Google and Apple might face.

Tariffs drive up the cost of phones in most cases. This is because when the companies who have relied on foreign goods for so long are suddenly made to pay extra, they try to offload that cost onto the consumers. Even if these companies try to shift production to the U.S. it’s not going to happen overnight. Uprooting their entire international processes will take years and the consumer will pay the difference during that time.

The proposed tariffs won’t just hurt U.S. consumers, they’ll likely do damage to U.S. businesses too. When a trade war is kicked off with one country imposing such high tariffs the affected countries can retaliate with tariffs of their own on U.S. products. This, naturally, decreases demand for such products in those countries. It especially makes it more difficult to gain a foothold in countries with less spending power.

So if such retaliatory tariffs are imposed on U.S. goods it would mean even more expensive smartphones in many other countries, driving them to budget Chinese offerings. A trade war of this scale also has the potential to disrupt global supply chains, leading to bottlenecks, shortages and even more burden being passed on to the consumer.

In short, as Mark Zandi — chief economist at Moody’s Analytics — has said, this is probably a “really bad idea”. But some American businesses disagree, claiming that this will help decrease foreign competition.

Guess we’ll find out sooner rather than later.