Apple (AAPL) has finally been ensnared in the trade war between the U.S. and China. On Friday, President Donald Trump said the tech giant wouldn't receive a waiver that would protect its Mac Pro desktop from America’s 25% tariffs on Chinese-made goods. The Pro is made in China.
In a tweet, Trump said Apple should make the Mac Pro in the U.S. if it wants to avoid the tariffs. But as much as the president thinks he can bully Apple into manufacturing its high-priced desktop on American soil, the chances of that happening are slim to none.
Apple left for a reason
When Apple announced the Mac Pro would be made in China, there was concern that it would set off Trump. That's because the previous generation Mac Pro was built in the U.S. In Texas, to be exact.
The move, which was made in 2013, was seen as a means to address some of the criticism Apple received for building its other products in China. But, according to The New York Times, building the Mac Pro in the U.S. was a disaster that resulted in delays, largely because one type of screw was in short supply. Eventually Apple had to get that screw from China.
Apple will not be given Tariff waiver, or relief, for Mac Pro parts that are made in China. Make them in the USA, no Tariffs!
— Donald J. Trump (@realDonaldTrump) July 26, 2019
The manufacturing problems in Texas likely spurred Apple to move production back to China for the new Mac Pro, which will be released later this year.
Despite that move, Apple still has thousands of employees in the U.S. In fact, the company announced in December 2018 that it expected to add an additional 20,000 jobs in the U.S. Those positions will be spread out across the country, including at a campus being constructed in Austin, Texas.
Trump's tariffs on Chinese-made goods had already sent Apple searching for new locations to produce its iPhone. According to Bloomberg, an executive from Foxconn, the chief manufacturer of Apple's iPhone, said the company could move production of Apple's devices out of China, though doing so would take time. What's more, the Mac Pro would need its own dedicated line.
How important is the Mac Pro for Apple?
The Mac Pro is the crème de la crème of Apple's Mac lineup. Announced at its Worldwide Developers Conference in June, the desktop is a beastly machine meant for graphic designers and the like who need tons of horsepower. Apple even developed a rolling kit to transport the Pro, and ensured that several Pros can be linked to create a Mac Pro server array.
All of that is to say it's not cheap. Apple set the starting price for the Mac Pro at $5,999. And that's just the base model. Pricing for the top-of-the-line model hasn't been announced, but according to estimates by The Verge, it could reach as much as $45,000.
Again, this isn't meant for the average consumer.
That said, Apple's Mac line, which includes its MacBook laptops and iMac, iMac Pro, and Mac mini, is the third largest division within Apple behind the iPhone and Services. In Q2 2019, the Mac division pulled in $5.5 billion, while the iPhone and services divisions made $31.1 billion and $11.5 billion in revenue, respectively.
In other words, while the Mac line is important to Apple, it's not as though the high-priced Mac Pro will have as much of an impact on the company's bottom line as something like a new iPhone.
Whether Apple will swallow the 25% tariffs on the Mac Pro or pass it on to consumers will be important to keep an eye on. The company will release the Pro later this fall. Either way, there's little chance the tariffs will bring Apple’s manufacturing back to the U.S.
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Email Daniel Howley at dhowley@yahoofinance.com; follow him on Twitter at @DanielHowley.
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