Apple should absorb US tariffs and hold iPhone price, analyst says

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iPhoneThe trade war between the United States and China seems to have no end in the short run. That is why President Donald Trump last week confirmed a new round of tariffs that should make Chinese products more expensive for the US consumer.

During the announcement, the US government even announced that iPhones, Macs and other Apple products will also be charged. As a result, many fear that Cupertino’s company will pass on this cost to the consumer. However, for the well-known analyst Ming-Chi Kuo, this should not happen.

According to a report released to investors, Apple has prepared for this moment. As a result, the company is poised to absorb any extra toll costs, something that should keep prices on the iPhone and other products in the US.

Kuo also believes that Apple should boost its non-Chinese production to serve the US market. Thus, factories in Vietnam should operate exclusively in manufacturing products for the country, while Chinese ones should supply the rest of the world.

That strategy should ensure that Apple can circumvent the 10 percent tariff on $ 300 billion in Chinese products that Trump announced last week. In a note, Kuo explains that Apple’s action should even improve the company’s image in his homeland:

 In the medium term, if Apple absorbs most of the additional costs due to tariffs, it will negatively impact the profits of its hardware business, but Apple will reap benefits in its brand image and supplier relationships. We also believe that the negative impact on Apple is limited and temporary because profit from the services business is growing, and non-Chinese production sites will gradually increase.

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Parallel to this, Kuo believes that Apple Watch, iPad and AirPods should be produced outside of China. Mac Pro and other notebooks won’t be able to evade rates. This is because the non-Chinese production of these devices is still considered too low.

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