Gene Munster: Why Apple will be spared China tariffs

“Trump sees Apple as a symbol of American strength.”

From a note to Loup Ventures subscribers Friday:

It is widely expected that the upcoming $325B in tariffs on goods imported from China will impact Apple products. We have a different view. We believe that little is known about the specifics and that ultimately Apple products will be spared from any tariff increases. Some additional thoughts:

The reason we believe Apple will be spared is based on our belief that Trump sees Apple as a symbol of American strength and, separately, he has a favorable relationship with Tim Cook that he is interested in maintaining.

My take: Not the first time Munster has made this prediction. Not wrong yet.

6 Comments

  1. Keith Hope said:

    Well, China could set about tripping up Apple in any number of ways. Inspections, delays, not approving new models for sale, whatever.

    Supply chain for Apple runs straight through China. Apple knows it, China knows it, US knows it.

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    May 10, 2019
  2. Fred Stein said:

    Perhaps someone reminded DJT that Huawei is growing world wide market share in SmartPhones and in wireless infrastructure.

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    May 10, 2019
  3. Jerry W Doyle said:

    I wrote a comment several posts back how Tim Cook’s presence at the presidential table serves Apple immensely in navigating troubled waters. President Trump craves recognition that comes with personal respect. Tim Cook is discerning and cognizant fully of this specific need of our president. I thought it very myopic of CEOs who left their seats at the presidential table claiming political duress. One can’t get anything done if one is not sitting at the table with the needed folk.

    Having made the above comment, though, I assume logically that the president must ensure that tariffs imposed on industrial goods are imposed in a “fair and equitable” manner relative to the affected industries.

    I agree fully with Keith Hope’s comment. China can and China already has shown its propensity for disrupting companies’ supply chains. It would pose no problem for Chinese authorities to procrastinate, to clot administrative procedures, impose new restrictions and institute other nefarious policies on industrial goods all while a huge cargo container ship sits empty outside the port waiting for the green light to enter and load its cargo. The downside of China disrupting companies’ supply chains is companies relocating their manufacturing plants to other receptive (and waiting) countries where manufacturing costs are cheaper, such as Viet Nam, Bangladesh and Egypt. In fact, this process already has begun. China is aware poignantly of it happening. It’s a double-edge sword for China.

    I argue that Chinese diplomacy historically has been and remains remarkably “risk-averse,” and guided by its narrow national interest. The Chinese Communist Party’s leadership understands acutely that to legitimize its monopoly control of domestic political power that it must create around 10 to 12 million new jobs annually to maintain employment rates at a level to preserve social order. It can’t have manufacturing companies leaving the mainland taking jobs to other countries as China took jobs from America and other developed nations.

    Those who rule in authoritarian states have more to fear from their own people than from other governments or from other governments’ militaries. The US has a democracy. We lost jobs to China. Instead of anarchy, we got DJT. That won’t be the outcome in China.

    Only a small cadre within the Communist Party runs a nation of 1.5B people. The Chinese leadership fears anarchy. China is hurting economically. The World Bank estimated China needed a growth rate of 9.5 percent simply to keep a constant rate of employment.

    The CCP’s unwillingness to protect intellectual property rights of foreign firms for the purpose of accomplishing the state’s domestic political goals have eroded its relationship with the USA and other foreign governments.

    This stand-off will end as China and DJT are pragmatists and deal makers who understand the value of compromise.

    1
    May 10, 2019

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