Commerce Secretary Wilbur Ross has advised that Apple’s reduced revenue expectations are not due to trade tensions between the United States and China, while simultaneously claiming that the dispute between the two countries “certainly has hurt” the Chinese economy.
Commerce Secretary Wilbur Ross (via CNBC)
The surprise announcement by Apple on January 2 by CEO Tim Cook revealed the iPhone producer was anticipating reporting $84 billion in revenue in its upcoming quarterly financial report, down from the original forecast of between $89 billion and $93 billion. In the memo, Cook citied “lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall,” including fewer iPhone upgrades during the period.
In response, Ross advised to CNBC’s Squawk Box “I don’t think Apple’s earnings miss had anything to do with the present trade talks.” Ross’ reasoning is that “there have been no tariffs put on Apple products, so that’s not it.”
While Ross is correct that no Apple product has been subjected to a tariff in the current trade dispute between the two countries, the possibility has been floated. A fee on imported iPhones from China for the U.S. market has been touted as an option, one that could potentially add between $60 and $160 to the cost of an iPhone XS.
Ross continued by saying that the tariffs on Chinese goods “certainly has hurt the Chinese economy,” noting reports claiming “Rate of growth in GDP heading down; rate of growth in retail sales heading down; rate of growth in capital investment heading down.”
The second half of Ross’ remarks are in-line with the Apple CEO’s statements on the matter, issued the same day as the note advising of the earnings revision.
“It’s clear that the economy began to slow there for the second half,” said Cook. “What I believe to be the case is the trade tensions between the United States and China put additional pressure on the economy.”
Despite his position as Commerce Secretary, Ross does not appear to have taken into account that a weakened economy will affect consumer spending habits, a possibility that likely leads to fewer iPhone sales in a challenged market.
On Friday, President Donald Trump commented on Apple’s reduced revenue, but expressed minimal concern for its fortunes, instead taking the opportunity to urge Cook into shifting production towards the United States instead of China.
Apple may also be feeling the effects of a boycott by Chinese firms against its products, in retaliation for the U.S. Administration’s trade policies as well as to show solidarity towards Huawei. Meng Wanzhou, Huawei’s CFO, was arrested in Canada at the request of the U.S. government under claims the company violated sanctions against Iran, an arrest that may have been influenced by the trade talks.