Trump Tells Cook iPhones Will Be Spared Chinese Tariffs: NYT
America’s business community is being squeezed by a Chinese government that is threatening hardball tactics like unexpected “customs delays” for goods produced by American (-owned or -invested) firms; and a White House that has steadfastly refused to back down from what by now has been acknowledged as a trade war by most. Gradually, even the market is waking up to the reality (considering that Dow futures are down 300+ points after Trump threatened another $200 billion in tariffs).
In the latest story of how American companies are responding to this fluid situation (there have been a lot of them in recent days), the New York Times reports how all three constituencies – the Chinese government, the US government and the US business community (or at least one of its most high-profile factions) – have turned to Apple CEO Tim Cook as the unofficial “top diplomat” of America’s tech community.
Apple’s chief executive, Timothy D. Cook, may be the leader of the world’s most valuable public company, but lately he has had to act a lot like the tech industry’s top diplomat.
Last month he visited the Oval Office to warn President Trump that tough talk on China could threaten Apple’s position in the country. In March, at a major summit meeting in Beijing, he called for “calmer heads” to prevail between the world’s two most powerful countries.
But in what is the key detail of the story the NYT – citing an anonymous individual – claims that the Trump Administration told Cook it won’t slap tariffs on iPhones.
The Trump administration has told Mr. Cook that it would not place tariffs on iPhones, which are assembled in China, according to a person familiar with the talks who declined to speak on the record for fear of upsetting negotiations. But Apple is worried China will retaliate in ways that hamstring its business, according to three people close to Apple who declined to be named because they were not authorized to speak publicly.
Apple fears “the Chinese-bureaucracy machine is going to kick in,” meaning the Chinese government could cause delays in its supply chain and increase scrutiny of its products under the guise of national-security concerns, according to one person close to the company. Apple has faced such retaliation before, another person said, and Reuters reported Ford vehicles are already facing delays at Chinese ports.
There is also concern that Apple could face reprisals for legal and regulatory efforts in Washington that have made it difficult for the Chinese tech giant Huawei to sell its phones and telecom equipment in the United States.
While Cook met with Trump at the White House last month to discuss trade policy, it’s unclear when the president made this promise. Of course, the White House’s word is always subject to change, which is probably why Cook has embraced his new role with such zeal. And why not? His company has a lot to lose if it suddenly must raise the price of each iPhone X by 25%, or 250$ (giving it an astronomically unaffordable price tag of $1,250)…
But Cook has plenty to worry about from the Chinese government, too.
In a trade and technology showdown between the United States and China, Apple and Mr. Cook have a lot to lose. With 41 stores and hundreds of millions of iPhones sold in the country, there is arguably no American company in China as successful, as high-profile and with as big a target on its back.
He also has a lot riding on this personally: Apple’s growth in China is Cook’s biggest on-paper accomplishment since taking over in 2011 from his mentor, Steve Jobs.
Since he took over Apple from its co-founder Steve Jobs, in 2011, questions about whether Mr. Cook, 57, could recreate the magic that led to the iPod and iPhone have persisted. For Mr. Cook, the analogous breakthrough — and potentially his legacy as the heir to Mr. Jobs — has come not from a gadget, but from a geography: China.
Under Mr. Cook’s leadership, Apple’s business in China grew from a fledgling success to an empire with annual revenues of around $50 billion — just a bit under a quarter of what the company takes in worldwide. He did this while China was tightening internet controls and shutting out other American tech giants.
Given China’s growing importance to Apple’s bottom line, Cook has spent quite a bit of time in the country, schmoozing with officials from the Communist Party. He can apparently speak basic Mandarin.
Mr. Cook, who knows a bit of Mandarin, has attended China’s most important political events in a critical year for Mr. Xi. Days after a Chinese Communist Party congress wrote Mr. Xi’s ideas and name into the constitution, elevating him to the same status as Mao Zedong, Mr. Cook joined a small group of American and Chinese executives for a meeting where Mr. Xi lectured about innovation and reform.
Later, Mr. Cook attended China’s World Internet Conference, an effort by Beijing to create a Davos-like conference for technology. There he met Wang Huning, a new member of China’s standing committee — the party’s top leadership group — and an ideological force behind China’s deepening authoritarianism.
In March, just after an annual meeting of China’s rubber-stamp Parliament formally abolished presidential term limits, Mr. Cook attended a major summit meeting that brings together Chinese policymakers and corporate leaders.
And when critics assail him for condoning the Chinese government’s increasingly authoritarian bent, Cook offers a convenient excuse: He’s trying to change things “from the inside,” he says.
Mr. Cook has long defended Apple’s presence in China as a way to help change the country from the inside. “Each country in the world decides their laws and their regulations. And so your choice is: Do you participate, or do you stand on the sideline and yell at how things should be?” he said at a Fortune event in China in December. “You get in the arena, because nothing ever changes from the sideline.”
Of course, if China actually believed that “regime change” was anywhere near the top of Cook’s priorities, Apple would’ve been tossed out of the country with the other American tech giants. Meanwhile, the NYT says Cook has found it easier to access top officials from the Trump Administration than their counterparts from the Obama era.
While other tech firms have balked, Apple has acquiesced to seemingly every one of the Chinese government’s demands. It stores data on Chinese-run servers, it removes apps from its China app store when the Chinese government disapproves. Still, Apple has faced retaliation from China in the past: After the Obama administration indicted five Chinese military hackers back in 2014, China delayed approvals of the iPhone 6, flagging it for additional security review. Apple viewed this as retaliation for US policy. And in 2018, Apple has more money invested in different parts of the Chinese economy than it ever has before, including two research-and-development centers and a $1 billion investment in the Chinese ride-sharing company Didi Chuxing.
In other words, Apple has a lot to lose if this trade war goes off the rails. And Wall Street analysts will be watching closely for any sign that the Communist Party is turning against Apple. As Dean Garfield, head of the Information Technology Industry Council, a trade group that represents Apple and other tech companies, tells the NYT that while Chinese consumers do love Apple products “they would also love Facebook and Google.”
“Xi and the national party will do what’s in their interest.”
In other words: For Apple, it’s either play ball, or get out.