David Garrity on Bloomberg – Apple Will Eat Higher Tariffs Costs For The Time Being

David Garrity on Apple’s upcoming product launch and impact of President Trump’s twitter attack on Apple’s production abroad. Hosted by Pimm Fox and Lisa Abramowicz.

To listen to replay, click here.

AAPL Product Launch Migrates iPhone X Features To Lower Price-point Products While Upgrading Chipset

If it’s September, it’s time for AAPL to introduce upgrades to its iPhone product line ahead of the year-end holiday shopping season. As has been the case with product announcements past, AAPL is migrating product features that were introduced previously with its top end iPhone product down to lower price-point products. In this case, facial recognition which was launched last fall with the iPhone X will be integrated into the lower priced iPhone Xc. At the same time, AAPL is upgrading the iPhone Xc product line with the A12 Bionic chips which along with the iOS12 update should offer consumers a faster interface. Separately, along with FaceID, the new products will lose the “Home” button and most likely require owners to acquire an entirely new set of accessories to go with, something that will expose these consumers to the increased tariffs the Trump administration is imposing on US imports from China.

AAPL Notes Trump Tariffs Will Impact Prices To Consumers, But Not On The iPhone

With the Trump administration continuing to beat the trade tariff drum, AAPL took the opportunity to discuss the impact on its customers and operations in a letter to the U.S. Trade Representative last week. Overall, AAPL stated “Our concern with these tariffs is that the U.S. will be hardest hit, and that will result in lower U.S. growth and competitiveness and higher prices for U.S. consumers.” Carried to an extreme, the impact of tariffs, namely raising prices and slowing growth, would lead to a return to the “stagflation” characteristic of the 1970s. Near term, given its dual mandate, the Federal Reserve will most likely move to raise interest rates so as to contain the threat of tariff-led inflation. The Trump administration suggestion that AAPL and other companies whose global supply chains are impacted by tariffs should move to establish local production flies in the face of capital efficiency by promoting the creation of excess capacity, something that only serves over time to depress economic growth by inevitably requiring consolidation. Rather than promote redundant investment, the Trump administration if it wishes to promote domestic economic activity should instead promote innovation which serves to improve competitive position and long-term expansion. Like many of the Trump administration’s moves, tariffs are just short-term “pixie dust” that will only undermine the companies that are planning and building for the long-term future. Tariffs are bad for business and bad for America.