Apple, tariffs, and the art of war

We are still within the sequence of energies described in Newton’s Third Law of Motion, “every action has an equal and opposite reaction.” In this case, Apple, already badly bruised by Trump’s tariffs and their impact on its business, will now take another kicking as nations react to those oddly calculated trade taxes. Europe is gunning for Apple’s services, while China is about to stick some of the world’s rarest components behind its own trade wall. 

The third law

China, predictably, isn’t happy. Not only has it slapped a reciprocal 34% tariff against US goods, but it also introduced export restrictions on rare earth materials — this will have a direct and significant impact on tech, as these are used in almost every electronic device.

That includes Macs and PCs, smartphones and tablets, as well as weapons systems, energy-generation tech, and electric cars. China produces around 90% of the world’s refined rare earths and the new export restrictions are being applied against exports to all countries. The exports haven’t been banned, but the latest move does give Beijing the strategic power to restrict them or even turn them off. (Not all is lost, of course. Other nations also have some of these materials, including Canada, for example).

France, meanwhile, is warning that the EU’s second line response to these tariffs will be aimed at digital services, such as those provided by all the Big Tech firms — Amazon, Apple, Google, Meta, and Microsoft.

This is also a strategic approach, given that services are popular across the region and have already emerged as the bulwark against the recession those firms all knew was coming but never called out, preferring socialism for the rich. (And given Apple’s really under pressure in the EU, at what point will the US decide to relent in some fields to give its big tax revenue generator a break?)

Also, in the run up to this chapter, don’t be too surprised if Apple — and other companies selling products into the US — imported bigly piles of hardware to meet short-term demand. 

Tactical silence

Don’t expect to hear much from Apple’s leadership quite yet. Execs recognize that the sensible approach is to stay under water until others throw their own responding stones into the pool as the rocks of Trump’s tariff troubles ripple across an angry world trade pond.

They may have gamed out a whole range of potential scenarios, but must now wait to see what’s left after the storm. It’s only after both action and reaction have had time to play out that defensive plans can be put into effect.

I don’t imagine they feel particularly optimistic in the medium term. Investment bank JP Morgan now sees a 60% chance of global economic recession this year, up from a still uninspiring 40% before. A recession would further deepen the damage to consumer confidence, and no doubt cut tithes from product sales across every category, not just iPhones. But America’s biggest company will be especially impacted, and given it already supports 2.9 million US jobs, what’s good for Apple is good for America. 

As is what’s bad.

Battle of the bean counters

While the extent of the tariffs and the unpredictable nature of reactions to them makes the future hard to see, Apple’s leadership is shrewd. They’ll have read The Art of War enough times to understand the need to preserve what resources they do possess and use what defensive opportunities they can exploit.

Look at it this way: every company involved in hardware production rationally knows that the cost of repatriating production to the US would be trillions of dollars, and would take years, even if there were enough skilled workers to handle all that.

With trillions at stake, what do they do? Backstage, anticipate political maneuvering, lobbying, and a chance for a cohort of people not usually celebrated too much at Apple to shine. I’m talking about lawyers, accountants, tax experts, PR types, and corporate staff.

This really is their time.

Way I see it, just as product design saved Apple in the late ’90s with a message that echoed the zeitgeist then, tactical use of obscure tax and territorial law has now become equally important to the future of Apple and any other multinational company exposed to risk. In terms of profit and revenue, this is the time when the back room professionals must save the day. Defend. Delay. Navigate. Obfuscate. Be ready to innovate. Your shareholders are counting on you.

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