Impact of Global Trade War on Apple's Business and Supply Chain

This essay explores the impact of the U.S.-China trade war, initiated by President Trump, on Apple's business operations. It highlights how tariffs on Chinese industrial goods pose threats to Apple, which relies heavily on Chinese manufacturing. The analysis covers the potential increase in landed costs for Apple in the U.S. due to tariffs, the challenges of shifting manufacturing to the United States, and the potential disruption to Apple's supply chain. The essay also discusses the impact on Apple's market valuation, with potential gross margin declines and subsequent effects on the company's predicted revenue. It concludes that even if Apple attempts to shift manufacturing to the U.S., the process would be time-consuming and costly, citing the example of Foxconn's LCD plant in Wisconsin.

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Introduction
In 2018, the current U.S. President, Donald Trump to the distress of the U.S. trading
partners has kept his course of aggressive trade policy and regulations further imposing
significant punitive tariffs on countries which he accuses of cheating the U.S. labour force.
Trump administrative tariffs on China have been typically focusing on industrial goods and
products like aircraft engines as well as gas compressors [1]. However this trade war has further
been identified to pose critical threats on consumer electronics like smartphones which are
manufactured and assembled in China. The following paper evaluates the way Trump trade war
has been posing threats to the business operations of Apple, the largest U.S technology firms
which China exports to the U.S.
Discussion
Impact of Trump’s Trade War on Apple’s market valuation
Reports by Forbes reveal that Apple, the biggest U.S. technology firm operates a wide
range of its processes of manufacturing in China through producers hired through agreements
such as Foxconn. While the gross worth added in China is not substantial for major proportion of
Apple’s merchandise, the landed costs of Apple in the U.S. could increase if taxes have been
obligated as finish goods are distributed from China [2]. However to successfully evade such
excise duties, Apple may face critical obligations to shift away its manufacture to the United
States or other industrial sectors. Furthermore, as the implication on Apple appliance assemblage
costs per se has the propensity to be crucial, the disorder Apple’s smooth supply chain can be
seen as a greater area of problem as Apple might face challenges to modify its logistics and
traders.
The US MNC could further carry on trading its goods through importation from Chinese

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industrial sector even if excise duties are forced on the company. These duties however would
give rise to Apple’s landed expenditures and pose impact on the gross margins. Thus if the
company could significantly modify its total margins decline by around 2% from 38% to 35.5%
in 2019, financial year, it could consequential to the shortcoming of about 5% to the price that
has been predicted for Apple based on its estimation of 2019 revenue generation [3].
Apple will face challenges in assembling its part in America
Reports by the New York Times indicated that the major manufacturing segment of the
international electronics sector shifted to Asia during the 1980s to 1990s. As a result, Apple by
shifting its manufacturing unit from Asia will not be able to gain much value especially for the
U.S economy and its workers [4].
Conclusion
Therefore to conclude it must be stated that even if Apple intends to assemble its parts or
shift its manufacturing plant to America, such a procedure would require significant amount of
time to establish. Further to this, cost per unit will also be more than in USA than production cost
in Asia. For instance, author has noted that Wisconsin gave an estimated amount of $3 billion in
funding to Foxconn in order to build an LCD plant in the region of Midwestern United States.

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References
[1]J. Gress, "We estimate China only makes $8.46 from an iPhone – and that's why Trump's
trade war is futile", The Conversation, 2018. [Online]. Available:
https://theconversation.com/we-estimate-china-only-makes-8-46-from-an-iphone-and-thats-why-
trumps-trade-war-is-futile-99258. [Accessed: 12- Oct- 2018].
[2]T. Team, "How A Trade War With China Would Impact Apple's Valuation: An Interactive
Analysis", Forbes.com, 2018. [Online]. Available:
https://www.forbes.com/sites/greatspeculations/2018/09/11/how-a-trade-war-with-china-would-
impact-apples-valuation-an-interactive-analysis/#15827b2065c2. [Accessed: 12- Oct- 2018].
[3]A. Kharpal, "Apple is the big tech firm most at risk from a US-China trade war", CNBC,
2018. [Online]. Available: https://www.cnbc.com/2018/06/19/apple-is-the-big-tech-firm-most-
at-risk-from-a-us-china-trade-war.html. [Accessed: 12- Oct- 2018].
[4]C. Kang, "Trump’s China Fight Puts U.S. Tech in the Cross Hairs", Nytimes.com, 2018.
[Online]. Available: https://www.nytimes.com/2018/09/23/business/trump-china-tariffs-
tech.html. [Accessed: 12- Oct- 2018].