Donald Trump announced that his administration will be putting a “very large tariff on chips and semiconductors” that is designed to encourage production stateside. The U.S. president said it would be “approximately 100 per cent.”
In his announcement, Trump highlighted “companies like Apple, if you’re building in the United States or have committed to building in the United States, there will be no charge.”
Financial analyst John Ehrlichman told CTV Your Morning on Friday the move is not just about economic security, but is political in nature.
Ehrlichman explained how Apple CEO Tim Cook got in the president’s good books, bringing with him a 24-carat plaque that read “Made in America.”
“There’s arguably no bigger CEO, in America, or in the world, than Tim Cook. He’s in the Oval Office and he’s trying to appease the president,” Ehrlichman said. “The president loves that and uses that as the backdrop to say, ‘by the way, if you’re not following the Apple way, you could be subject to these tariffs.’”
The Associated Press reported that American tech giants have already made commitments to invest nearly US$1.5 trillion in the U.S. since Trump returned to office in January. Apple is part of those agreements, with a total of about $600 billion committed to these stateside investments.
Apple relies on foreign labour and factories to create their iPhones and other consumer products. One expert told CNN in April that an iPhone made in the U.S. could jump three times in price to US$3,500, or more than C$4,800.
Ehrlichman said working with Trump is Apple’s best hope.
“Here is the president saying ‘if you invest in America, you can avoid these additional import costs,’ which would double the costs for companies and ultimately be passed on to consumers,” he said.
‘Directed squarely at China’
Chip manufacturing can be a fairly decentralized process, Ehrlichman said, with products often moving from China to South Korea, to Malaysia, to Vietnam, creating a wide ecosystem.
But he’s sure the president’s announcement was designed to strike at one of the main American rivals across the pacific.
“Obviously a lot of this is directed squarely at China,” adding that Trump is trying to isolate them from the industry.
“Even this week, you saw Donald Trump accusing the CEO of Intel, probably the most storied chip manufacturer,” he added. “The new CEO has ties to China, whether its through the business he used to run doing business with China, his personal investments, he wants him out of the job.”
Ehrlichman says Trump is currently being courted by one of China’s main rivals, Taiwan.
“You’ve got Taiwan Semiconductor, who have committed billions and billions of dollars to the U.S. to make sure the U.S. is on side with their strategies.”
If countries like Taiwan want continued American support, they may have to bring their own gift for the president.
“Bring a 24-carat gold plaque to the White House or the tariff story could go on,” Ehrlichman said.
