Below is our translation of an article from RIA Novosti with commentary and notes [in brackets] by Vince Dhimos.
It was disturbing enough to see how ideological conservatism promoted the extraction of shale oil and gas by a process that all but guarantees economic failure. But now we see more of the results of Trump’s radical anti-China policies that have put most soybean farmers out of business, sabotaged the LNG deal with China and cost world stocks $5 trillion so far, according to Deutsche Bank. The losses mount up with Trump’s demand that Apple stop making iPhones in China. What he doesn’t seem to realize is the Chinese customers were a major share of the buyers’ market for iPhones and Apple computers and gadgets, and ordinary Chinese citizens are now boycotting Apple. Chinese are very smart and probably will not be back for more backstabs. Ever. Does anyone still remember when traditional conservatives insisted that the government must stay out of business and allow entrepreneurs to make important business decisions that affected their bottom line? Keeping government out of business was a major pillar of conservative thinking. Politicians who tried to interfere with “free market” capitalism were branded commies or socialists. Now, however, that pillar has been removed and replaced by a new one, namely, allowing Trump to make such decisions for the entrepreneurs. The rational for this upheaval is that Trump – who had, however, filed for bankruptcy 6 times before he entered politics – was a successful business man and perfectly suited for the job of telling US business managers how to run their show. Who better to manage the US economy than a billionaire entertainer?
Trump's new victim: Apple kicked out of China
Aug 23, 2019
MOSCOW, Aug 23 - RIA Novosti, Natalya Dembinskaya. iPhone sales are falling around the world, and the company itself has lost value: $962 billion, compared to $1.2 trillion at the end of 2018 [my highlighting]. In the context of an aggressive trade war between the USA and China, Apple is rapidly losing ground in one of its key markets – the Chinese are buying less and less smartphones, tablets and computers. Trump, meanwhile, seems to have prepared a new assault: he wants Apple to leave China and cut production. RIA Novosti reports on how one of the largest IT companies in Silicon Valley risks becoming a bargaining chip in the trade dispute between Washington and Beijing.
In the third quarter, Apple's profits fell 13 percent. In terms of revenue — the company earned nearly $ 54 billion — that's just one percent more than a year earlier. However, analysts were alarmed by something else: the revenue from iPhone sales, which traditionally was its main income source, fell significantly. It amounted to 25 billion dollars against 29.47 billion dollars a year earlier. For the first time since 2012, smartphone sales have brought the Apple company less than half of its revenue. Their annual sales volume for the quarter decreased by 12 percent.
One of the key reasons apple smartphone sales are plummeting is a significant decline in demand in China. The corporation is actually losing this key market.
After the scandal with Huawei, ordinary Chinese began to boycott the Apple devices. In addition, in December, a Chinese court decided to ban the company from selling seven iPhone models in China [so far, American media have been reporting the losses in the trade war based solely on the value lost by tariffs on imports. However, this loss falls outside that calculation and is huge]. The fact that Apple in China is in serious trouble became clear by the end of 2018: in the fourth quarter, sales of its smartphones there fell immediately by 20 percent.
The aggravation of the trade war bodes problems for the company. But Donald Trump earlier promised Apple CEO Tim Cook that the new duties to be imposed on Chinese goods will not affect the devices and accessories assembled in China by order of Apple.
In general, he kept his word. In August, the United States imposed ten percent duties (and since September they threaten to raise them to 25 percent) on Chinese imports worth $300 billion. But US trade mission decided to postpone the introduction of tariffs on smartphones, tablets, laptops and other gadgets until December 15.
However, Apple's management is no longer sure of anything. The other day, the head of the company Tim Cook met with Donald Trump and tried to explain to him that the introduction of duties on Chinese goods would adversely affect Apple’s competition with Samsung. As a result, the main competitor will get an advantage, because, unlike Apple products, the products of the South Korean company will not be taxed upon import to the United States.
As noted by Business Insider, in an attempt to reason with the head of the White House and warn him against escalating the trade war, Cook met Trump “five times a year”. “And there are signs that Cook’s open dialogue with Trump has benefited Apple. The company has already received a temporary reprieve from ten percent tariffs,” the publication said.
But on August 20, Trump suddenly declared: if he hadn’t helped companies like Apple, "they would have big problems." By "help", the head of the White House clearly meant a deferral of duties. According to him, the "help" that he renders, in particular, to Apple, "will last a very short time," and therefore they must do what they must – leave China.
The American president recalled that due to the transfer of production of foreign companies from China to other countries, China lost two billion dollars and almost two million jobs, and will lose even more.
Trump was dissatisfied with the fact that the corporation, as the American media reported, transferred the production of its professional Mac Pro computer workstation from the USA to the PRC. Therefore, according to him, now the American authorities "are not going to make any exceptions for it."
To protect American consumers from higher prices for their products, Apple itself was going to withdraw production from China - but only partially. As reported in June by the Nikkei Asian Review, the company is exploring the possibility of withdrawing from China from 15 to 30 percent of production capacity. And even this step, according to analysts, will cost her dearly – up to 15 percent of its revenues.
Trump is obsessed with the idea that corporation generally should produce all of its devices, and first of all the iPhone, in the United States. “Do not forget that Apple makes its products in China,” he said back in January. “I told Tim Cook: my friend, let’s make it in the USA.”
Observers shrug helplessly: the idea may not be bad, but it just does not take into account a number of logistical considerations and economic realities. First, US production will significantly increase manufacturing costs. And besides - where to get so many components for assembly outside of China?
For the Silicon Valley giant, this attitude of Trump’s does not bode well. According to the most conservative estimates, the transfer of production to the United States would cost the company $40 billion. After an unexpected “tariff” threat, Apple immediately lost $42 billion in market value. And, apparently, this is only the beginning.
Weak smartphone sales are already pulling the corporation's business down. It is trying to offset the declining interest in the iPhone with the continued growth of its digital services business. But, as analysts note, here it falls into a vicious cycle. The service sector that Apple is counting on and the sales of its other devices are directly related to how many customers will remain in the Apple ecosystem, and the latter depends on iPhone sales.
END OF TRANSLATION
VINCE ON QUORA: WHY DID TRUMP START A WAR WITH CHINA?
HOW THE TARIFFS AND SANCTIONS CAME BACK TO BITE THEIR MASTER
IF CHINA IS DOMINANT WORLD ECONOMY, WHY NOT IMITATE IT?
TRUMP’S ASSAULT ON SCIENCE AND TECHNOLOGY
CHINESE ECONOMIST EXAMINES IMPACT OF TRUMP TRADE WAR ON US ECONOMY
US ATTEMPTS TO SABOTAGE CHINA ARE A BOON TO RUSSIA
CHINA DECLARES PEOPLE’S WAR ON US ECONOMY
US SANCTIONS ON RUSSIAN ALUMINIUM BACKFIRED BIG TIME