Donald Trump continues in his quest to make companies produce their goods in the US at any cost for them or for the customers, who would not be able to afford many of the items they consume if they were produced in country. While the current Administration seemed to have negotiated an exception for Apple, just like they did during Trump’s first term, it seems like the negotiations have soured and now the tech giant is back to being threatened with a 25% tariff if they do not move their manufacturing to the US.
Due to the tensions with China, Apple quickly relocated most of their production to India, where they also have factories to take advantage of the extra 10% tariff instead of the threatened 134% that Trump kept raising on the Chinese government, but it seems like this move displeased the new White House occupant enough to threaten Apple into submission.
Regrettably for everyone involved, it does not seem like the threat will do much to move production to the US as there are some components of the iPhone that just cannot done stateside, whether the president agrees or not.
The reason why Apple will likely not move production from India and China to the US
As many may have already guessed, the main reason why tech companies are not moving their production stateside despite threats is labor costs. Most new technology has a lot of moving pieces, some of which can be automated, some of which cannot, and for those pieces that cannot be automated, there needs to be specialized labor involved that costs a pretty penny when you look for it outside of a developing country where salaries are comparatively low and workers conditions are questionably enforced.
This is, of course, a terrible way to look at the situation, but it remains the reality of the consumer culture that we live in, we want quality goods, that are not too expensive, and we want them quickly, and something has to give to make this happen, and that is generally labor protections and costs associated with production.
But Trump does not seem to be willing to give up his idyllic idea of companies like Apple and Google returning “home” and using 100% of domestic resources to manufacture their devices. This would mean a big push to the economy, as more factories are built, machinery to automate processes is created, of course, also in the US, and the industry magically revives many forgotten towns, but this idea is not feasible and poses a major technical challenge.
Commerce Secretary Howard Lutnick told CBS last month that the work of “millions and millions of human beings screwing in little, little screws to make iPhones” would come to the United States and be automated, creating jobs for skilled trade workers such as mechanics and electricians, but that is not what is going to happen.
As Tim Cook, CEO of Apple explained, robotics currently does not allow for the automation of certain essential tasks for iPhone assembly, such as the insertion of those aforementioned tiny screws, and even if it did, the US does not have as much specialized labor as there is in other countries like China or India, which means that they would have to invest time and money in retaining many individuals to do the jobs, which would delay production and skyrocket the manufacturing costs on American soil.
Those who have done the math believe that a “made in the USA” iPhone could cost at least $2,300, which is still a lot more than the cost of the current iPhone with the 25% Apple specific tariff.
Tariff, which by the way, would not be really legal according to the current legal system, as Sally Stewart Laing, a partner at Akin Gump in Washington explains “”There’s no clear legal authority that permits company-specific tariffs, but the Trump administration may try to shoehorn it under its emergency power authorities.”