AAPL Announces $1BN Expansion Of Austin, TX Operations, A Response To Trump “America First” Edict?
As part of a series of domestic capacity expansion announcements, AAPL indicated earlier today that it will spend $1BN over the next 3 years to expand its operations in Austin, TX to build a new campus housing 15,000 employees. Other U.S. locations will also receive significant investment over the same period, according to the AAPL announcement. On its face, it appears AAPL management is kao-taoing to the Trump Administration’s edict of “America First”. However, important to note it most likely AAPL plans won’t involve hiring the non-college educated rural voters Trump counts as his political base.
The Unwinding Of Global Supply Chains In The Face Of Protectionism Has Significant Long-term Inflationary Implications
Like other global sectors, the technology sector has over time built extended global supply chains whereby components and services are procured at the highest quality and lowest price made available by an open global economy. Consumers have benefitted from these economies of scale to enjoy innovative products (e.g. smartphones) at relatively low prices. The same point can be made relative to goods procured and distributed by companies such as Walmart. Protectionist strategies such as “America First” that rely heavily on punitive tariffs and seek to undermine multilateral trade arrangements in favor of replacement by a range of bilateral agreements serve only to complicate business for companies seeking to provide the best value for consumers. The net effect of undermining economies of scale and imposing competing standards is to raise costs for businesses and prices for consumers. Important to remember that tariffs are implemented by raising prices to U.S. consumers, not foreign producers. The wages of protectionism are ultimately inflation.
Market Volatility Ahead As Trump Builds Wall Against Economic Rationality
The announcements from AAPL are only a small part of what is the unwinding of global supply chains in response to the undermining of the multilateral institutions that have underpinned the growth of the global economy during the post-WWII era. Trump’s protectionist presidential edict of “America First” promises to drag the global economy into a slower growth, higher inflation paradigm as economies of scale previously achieved are unwound in the face of markets made smaller by protectionism’s rising walls. Consequently, investors should expect greater market volatility ahead as the tech sector and others are forced to dance through the Trumpian minefield of unintended consequences.