Trump's Proposed Tariffs And What They Could Mean For The Smartphone Industry

After a few very long weeks, the 2024 US election is finally over, with Donald Trump leading the vote count by a very large margin. Now that this is over, there’s another question on everyone’s mind: What happens next? Besides A Countless Among the very sensitive issues, the smartphone industry is also expected to undergo some changes. Here’s what you can expect. Trump, as he did during his first term, has talked about imposing tariffs on imported goods. The tariffs imposed during the aforementioned first term were already somewhat devastating, but Trump wants to take it even further this time.

[Tariff] It is the most beautiful word in the dictionary. More beautiful than love, more beautiful than respect.

-Donald Trump, New York Times (Subscription required), October 2024

Reports indicate that Trump wants to impose tariffs of 20% on all imports and tariffs of up to 60% on Chinese goods. He added that these tariffs will encourage American companies to bring their factories back home. However, whether companies actually do so or not, it will almost certainly mean higher prices for the average consumer.

How are you affected?

Expect to pay more for your iPhone 16 in the near future. | Video credit – Apple

Most major phone manufacturers – including Samsung, Apple and Google – rely on foreign imports to manufacture their products. If Trump’s proposed tariffs are implemented, Apple and Google will be the most affected of the three companies.

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

Google also relies on Chinese manufacturing for its Pixel phones and may not be so lucky when it comes to getting special favors from the president. Samsung will be the least affected because it closed its last factory in China in 2019. However, the 20% tariff still means some problems, although not to the extent that Google and Apple might face.Tariffs raise the cost of phones in most cases. This is because when companies that have relied on foreign goods for a long time are suddenly forced to pay extra, they try to offload that cost onto consumers. Even if these companies try to move production to the United States, it will not happen overnight. It would take years to uproot their entire international operations and the consumer would pay the difference during that time.

These tariffs could also hurt American companies

Google Pixel 9 may become more expensive outside the US | Video credit – Google

The proposed tariffs would not only hurt American consumers, but would likely hurt American companies as well. When a trade war breaks out with one country imposing such high tariffs, the affected countries can respond with their own tariffs on American products. This, of course, reduces the demand for such products in those countries. It particularly makes it more difficult to gain a foothold in countries with less purchasing power.

So, if such retaliatory tariffs are imposed on US goods, it would mean higher costs for smartphones in many other countries, pushing them towards budget Chinese offerings. A trade war of this magnitude also has the potential to disrupt global supply chains, leading to bottlenecks, shortages, and even more burden on the consumer.

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

I think we’ll find out sooner rather than later.