President Donald Trump has been threatening to increase tariffs on imported goods coming from China for quite some time now. Many companies that depend on China’s affordable and easily accessible manufacturing have expressed concern that a raise in tariffs would cause the retail prices on consumer goods to skyrocket. The already 25% tariff on goods has caused some inflation, but Trump’s latest threat–a 10% increase on top of the current 25% on the remaining $300 billion worth of goods coming into the U.S. from China, would cause a major fluctuation in stock markets around the world. Now, in the wake of controversy and to help companies like Apple prepare for a lucrative holiday season, the White House has announced that it will hold off on increasing the tariff on some of the goods that were going to suffer the greatest impact—which is mostly tech.
The trade war between the United States and China has been going on for years now. President Trump vowed to increase tariffs on goods imported from the Asian country in order to incentivize companies and retailers to source and manufacture their products domestically. This would theoretically boost the economy while simultaneously lowering unemployment rates in some of the nation’s most rural environments (because odds are low that Apple would open a massive manufacturing plant in New York City). The reality, however, is that an instant increase on tariffs by as much as 35% has shown to do little more than cause major fluctuations in stock markets—particularly for companies like Apple, which now assembles all of its products in China.
Changes In July Led To Escalation
In early July, President Trump met with Chinese President Xi Jinping to discuss a potential truce on the longstanding trade war. President Trump announced that the two had come to an agreement, and that pending future action on Xi’s side, the trade war would de-escalate into the end of the summer. One of the stipulations of the agreement was that China would not back out on purchasing agricultural goods from the United States, something they did not come through on, in addition to the fact that the country did not pull back on its sales of Fentanyl to the United States, as requested. In retaliation, President Trump threatened to increase the tariff rate by an added 10% on $300 billion worth of goods.
“We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing,” Trump wrote on Twitter on August 1. In the days following the August 1 announcement that tariffs would be increasing, stocks fell as concerns were raised for the future price of goods coming from China. Apple, which already sells its products with a steep price tag, worried that it would not meet sales goals if it had to raise its prices due to tariffs.
The White House announced on Tuesday that it would not be moving forward with its plans to increase the tariffs on September 1. Instead of scrapping the idea altogether, President Trump revealed that he will be putting the increase off until mid-December. This gives companies the chance to proceed with commerce plans as we head into the busy holiday season. Apple’s stock (AAPL) saw a rise of as much as 5.8% today as a result. For a complete list of which products are exempt from the tariff, check here.