U.S. Markets closed

Trump’s 2020 Campaign Collides With Trade War at Apple Plant

Jordan Fabian

(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. 

Donald Trump’s effort to tout U.S. economic growth collided with his trade war on Wednesday when he toured an Apple Inc. factory in Texas, where Tim Cook had the chance to plead in-person to keep Macs and iPhones free from tariffs.

Trump’s visit to the Austin factory, where Apple contractor Flex Ltd. assembles some of the company’s laptops, was intended to highlight the growth in U.S. manufacturing jobs since his inauguration. Trump has made U.S. economic growth the centerpiece of his campaign for re-election in 2020.

But the stop also highlighted the impact of Trump’s trade war with Beijing. The administration is currently considering whether to exempt Apple goods from a 15% tariff that took effect Sept. 1, covering about $110 billion in Chinese imports including the Apple Watch, AirPods and parts for the iPhone.

“When you build in the United States you don’t have to worry about tariffs,” Trump told reporters at the plant. In response to a question, Trump said he’s “looking at” exempting Apple from U.S. tariffs entirely, saying that the company’s South Korea-based competitor Samsung Electronics Co. may otherwise enjoy an unfair advantage in the U.S.

“I said some day we’re going to see Apple building plants in our country, not in China, and that’s what’s happening,” Trump said. “It’s all happening. It’s all the American dream.”

In reality, this is not happening: Apple still has most of its devices assembled outside the U.S., and the company relies heavily on China-based manufacturing partners.

Cultivated Relationship

Cook, Apple’s CEO, has cultivated a personal relationship with both Trump and his daughter, Ivanka, who is a White House senior adviser. He’s dined twice with Trump at his Bedminster, New Jersey, golf resort, attended a state dinner for French President Emmanuel Macron and even traveled with Ivanka Trump to visit schools in Idaho. But that rapport will be tested if Trump can’t reach what he calls a “phase-one” trade deal with Chinese President Xi Jinping that would roll back U.S. tariffs.

A round of tariffs set to take effect in December would be even more painful for Apple, including a 15% levy on the iPhone itself.

Apple announced Wednesday that it had begun construction on a $1 billion, 3-million-square-foot campus in Austin. “Building the Mac Pro, Apple’s most powerful device ever, in Austin is both a point of pride and a testament to the enduring power of American ingenuity,” Cook said in a statement that didn’t mention Trump’s visit.

The statement emphasized Apple’s U.S. footprint, saying the company relies on 9,000 suppliers in all 50 states and that it would contribute $350 billion to the domestic economy by 2023, including $30 billion in capital expenditures.

Trump and Cook toured the plant largely out of sight of reporters accompanying the president. At one point, Cook and factory workers demonstrated for the president how the Mac Pro is assembled.

A factory worker showed Trump a silver-colored plate for the Mac Pro that said “Assembled in the USA.”

“That’s what we want,” Trump responded.

Apple Tariffs

White House spokesman Judd Deere said the factory was “made possible through the president’s pro-growth and pro-business economic policies.” Treasury Secretary Steven Mnuchin and top White House economic adviser Larry Kudlow, two key figures on trade, accompanied Trump, as did senior advisers Jared Kushner and Ivanka Trump.

“We’re building the Mac Pro — Apple’s most powerful computer ever — right here in Austin because we believe in the power of American innovation,” Cook said in a statement distributed by the White House.

In its appeal for a waiver, Apple claims it cannot identify a manufacturing location outside China able to meet U.S. demand for the products or components that would be subject to tariffs.

Apple previously received tariff waivers on 10 of 15 requested items in September. Soon afterward, the company announced it would assemble its new Mac Pro in Austin, Texas, rather than China. Apple said at the time that the decision was “made possible” by the exclusions, which included components for the Mac Pro.

Cook’s Leverage

The sequence of events showed that Cook has some leverage on Trump. The president said in August that Cook personally appealed to him by arguing that tariffs would help Apple’s foreign competition.

“I have a lot of respect for Tim Cook. And Tim was talking to me about tariffs. And, you know, one of the things — and he made a good case — is that Samsung is their number-one competitor, and Samsung is not paying tariffs because they’re based in South Korea,” Trump told reporters in August.

Trump laid out his economic argument for re-election last week in a speech at the Economic Club of New York, highlighting his tax cuts and deregulation as key catalysts for economic growth. The U.S. added about 443,000 manufacturing jobs since January 2017, the month Trump took office, though factories have shed about 41,000 positions in the last two months.

Apple had planned to move Mac Pro assembly to China after a number of problems plagued the Austin facility, including trouble retaining skilled labor. The factory produced a previous version of the computer starting in 2013.

While Cook has said his company supports 2.4 million jobs in the U.S., only a small fraction are for final assembly. Earlier this decade, the company assembled a small amount of iMacs at a facility in Elk Grove, California, but it currently does not assemble any product in the U.S. outside of Texas. Apple has offices in San Diego, San Francisco, New York, Austin, Denver, Seattle, Florida, and Boston.

In December 2018, the company announced plans to invest $1 billion in its existing Austin campus so that it could employ as many as 15,000 workers, according to the White House.

(Updates with additional details of trip beginning in 12th paragraph)

--With assistance from Mark Gurman and Mark Niquette.

To contact the reporter on this story: Jordan Fabian in Washington at jfabian6@bloomberg.net

To contact the editors responsible for this story: Alex Wayne at awayne3@bloomberg.net, Joshua Gallu

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.