Electronic companies has lost $10 billion over US-China trade war; expected to worsen by September 1

On September 1, consumers will be greeted with the imposition of the Trump administration’s tariffs on billions of dollars worth of imports from China. Electronic companies importing items like TVs, speakers, drones, and many others will be subjected to pay a 15% tariff to the U.S. government.

According to a spokeswoman for the Consumer Tech Association (CTA) Bronwyn Flores, the tariffs would cause the prices of gadgets and other products to increase for consumers in the United States.

The Consumer Tech Association (CTA) is a trade group representing 2,000 different companies in the electronics industry. The group includes brands like Apple, LG, and Samsung. It also includes retail chains like Walgreens, Best Buy, and Walmart.

“You’re not likely to see price increases for consumers starting Sunday. But you might start to see it in November for Black Friday, so if you want a new TV for the Super Bowl, you might want to get it soon,” said Flores.

She also adds: “You’re going to start to see these price increases this holiday season.”

Since July 2018, there have been tariffs in place that have affected the electronics industry specifically parts and components. These tariffs have cost the industry about $10 billion.

When the new round of tariffs is in place starting September 1, these would be affecting more finished electronic goods.

According to the CTA, around $52 billion worth of consumer goods will be subjected to List 4a. This is what trade experts refer to the phase of tariffs that will start this Sunday. It would impose an additional import tax on several consumer electronic items. These include digital cameras, fitness trackers, smartwatches, lithium batteries, desktop computers, and many others.

One of the most vulnerable companies to be caught in the U.S.-China trade war is Apple. The Cupertino-based tech giant is often referred to as the poster child of the trade tension between the two biggest economies in the world. The company’s final assembly of products are mostly done in China.

“Apple has bet the farm on China with its flagship Foxconn factory and employs 1.4 million Chinese at peak through the supply chain. The lifeblood of Apple’s supply chain is in China as well as much of its demand and speaks to why this trade scuffle is a $20-$25 overhang on the stock in our opinion,” said Wedbush analyst Dan Ives.

Apple has been taking measures to prevent the tariffs from affecting its various products. In June 2019, the company sent a letter addressed to the government saying that by imposing tariffs on its products, it would result in a reduction of its contribution to the U.S. economy.

On September 1, its AirPods and Apple Watch will be part of the products that will be imposed with a 15% tariff by the U.S. government. These two belong to one of the company’s fastest-growing product categories. Other Apple products set to be hit by 15% tariffs on Sunday include HomePod, iMac computers, and many others.

Apple’s iPhone, which makes up more than half of the company’s revenue, will not have the additional tariff until the next round of tariffs on December 15.

There has been no confirmation whether Apple will be raising the prices of its products or they will be absorbing the costs. According to analysts from J.P. Morgan, Apple will assume the costs. This will most likely cost Apple $500 million.

In a recent dinner with U.S. President Donald Trump, Apple CEO Tim Cook spoke about the company’s position. Cook has communicated with Trump how Samsung and its products will have an edge over Apple because they won’t be subjected to the tariffs.

Apple’s won’t be the only one to feel an even bigger impact once the next round of tariffs starts on December 15. More consumer electronics products worth $115 billion will be facing the tariffs. These include laptops, tablets, gaming consoles, and smartphones.

Technology companies like Apple and many others will have an opportunity to apply for a tariff exclusion. There have been no details about the exclusion process for products that are subjected to a higher tariff yet.

Apple is most likely to apply for the exclusion. In the past, it has applied and received exemptions from Office of the United States Trade Representative.

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