In the past two weeks, the United States has imposed increasing tariffs on China in an unprecedented trade war escalation. First 10%, then another 10% up to 20%. An additional sting of 34% that brought the total to an unthinkable 54%. Shortly after, another 50% as retaliation when China did not back down and retaliated. From there to 125%, to 145%, with no one ruling out going much further. And yet, all of Donald Trump's rhetoric, which led to the wildest week in markets in decades and cost hundreds of billions to companies most linked to production in Asia, had a small print.
Smartphones, laptops, chips, and other electronic products, the bulk of what the US buys from China, will be exempt from the worst part of the tariff onslaught, after the most pessimistic calculations indicated that iPhones, a religion in the US, could have seen their prices go above $2,000 or $2,500. It is estimated that 80% of Apple phones sold in the United States are manufactured in China, while the remaining 20% are produced in India, despite Apple's efforts to diversify its supply chain.
The news was not announced by the president, who on Friday afternoon went to Florida to play golf at his residence, as he does every weekend. It was simply known through the details of an information sheet, guidance from customs services to facilitate border procedures.
The guide, published on Friday night by the US Customs and Border Protection, explains that the products will be subject to a tariff, the one that has been in place since February, but not at 145%. This also applies to specialized machinery used to manufacture semiconductors or transistors, which will not pay the surcharges that would have made their commercialization unviable. A nod to the chip manufacturing giant Taiwan Semiconductor Manufacturing Co (TSMC), which has suffered greatly in the markets in the past week.
Neither flat-screen TVs, tablets, and other parts will be affected, benefiting companies like Apple, which have announced alongside the president investments of hundreds of billions in the US in the coming years. But also Samsung, HP, Dell, and Microsoft, which manufacture a good portion of their electronic products outside the US.
Although not clear, President Trump hinted the day before aboard Air Force One with the press, saying to the pool that follows him everywhere that "there could be a couple of exceptions for obvious reasons, but I would say 10% is a minimum limit." Last Thursday, also speaking with journalists a few hours after informing the world, and most of his economic team, through a message on his social media, that he was partially backtracking on his trade standoff with the whole world, Trump had already shown his willingness.
From his words that afternoon, it was very clear that he had backtracked due to pressure from debt markets. It had been a reaction to the emergency, not another step in the supposed master negotiating plan boasted by his spokespeople. But above all, the door was open for those with more access to the White House, the best positioned and most skilled lobbyists, to benefit from exemptions.
"I will review it over time. We will review it," Trump said. "There are some companies for which it has been difficult; there are others that, due to the nature of the company, are a little more affected, and we will review them." When asked how he would determine which companies could receive such exemption, Trump replied: "Instinctively. It's more instinct than anything else (...) You have to be flexible, and I can do it." What is not clear, if he exempts high technology from reciprocal tariffs, is what kind of production and jobs he expects to repatriate with his protectionist decisions.
What Trump calls instinct and flexibility, critics call favoritism, discrimination, even corruption. Pure arbitrariness in the world's largest economy, causing economic actors to not know what to expect and understand that the only way to thrive, and even survive, is to have access to the president, his family, and his inner circle. At any cost.
The administration has been assuring for weeks that tariffs will bring the production of electronic products to the US, giving many examples of how many high-level jobs would be created. And that it was unacceptable not to manufacture semiconductors and depend on Taiwan or South Korea. But the transition would take years, at best, and the cost is enormous.
Commerce Secretary Howard Lutnick said earlier this week on CBS News that "great American workers" would build and operate new national factories and that there would be an "army of millions and millions of human beings screwing small screws to manufacture iPhones, that kind of thing will come to the United States," which sparked a wave of jokes and memes in Asia.
White House spokesperson Karoline Leavitt shortly after insisted that Trump "fully" believed that iPhones could be manufactured in the United States. And the head of foreign trade, Jameison Greeer, defended the same in Congress on Thursday. "The president has been clear that he will not grant exemptions or exceptions in the short term," he stated.
"President Trump has made it clear that the United States cannot depend on China for the manufacturing of critical technologies such as semiconductors, chips, smartphones, and laptops. That is why the president has secured trillions of dollars in American investments from the world's largest tech companies, such as Apple, Taiwan Semiconductor Manufacturing Company, and Nvidia. Under the president's direction, these companies are striving to move their production to the US as soon as possible," Leavitt assured.
This despite the fact that on Tuesday, at a Republican National Committee event, Trump openly criticized the Biden administration's decision to grant a $6.6 billion grant to TSMC for semiconductor production in Phoenix. Trump stated that he had not given any money to TSMC and warned the company: "If they do not build their plant here, they will pay a very high tax: 25%, maybe 50%, maybe 75%, maybe 100%."