Federal court blocks Trump tariffs; worst-case iPhone cost would exceed $4k

The ongoing saga of potential tariffs on iPhones continues. After Trump threatened Apple with an additional 25% tariff on iPhones, the worst-case scenario could see the cost of the most expensive model in the line-up exceed $4,000.

However, a federal court has ruled that the president doesn’t actually have the legal authority to impose tariffs at all, let alone the most extreme ones he has threatened, and has vacated the executive orders issued so far …

The backstory

In the space of two months, the Trump administration announced tariffs on products manufactured in China that started at 10% and ramped up to 145%. 

An exemption for consumer electronics products was later announced, as we predicted, but the administration subsequently said that this would be purely temporary. With most Apple products made in China, that would potentially result in massive increases to US pricing.

Earlier this month, Trump ramped things up again with a new threat of an additional 25% tariff specifically targeting Apple, as seeming payback for CEO Tim Cook declining an invitation to join his Middle East tour. Trump later backtracked on targeting Apple, saying it would affect other companies too.

Federal court blocks Trump tariffs

CNET reports that the US Court of International Trade has now nullified all of Trump’s executive orders, ruling that the president exceeded his powers – as only Congress can impose or vary tariffs on international trade.

The three-judge panel at the New York-based US Court of International Trade concluded that Congress has exclusive authority to regulate commerce with other countries and that the International Emergency Economic Powers Act of 1977 — the crux of Trump’s argument to impose the tariffs — doesn’t give the president “unbounded” authority to impose the duties.

“An unlimited delegation of tariff authority would constitute an improper abdication of legislative power to another branch of government,” the court wrote in its opinion […]

“The challenged Tariff Orders will be vacated and their operation permanently enjoined,” the panel ruled.

Trump is unlikely to accept the ruling, suggesting chaos ahead as American government agencies and businesses alike have to figure out how to respond to conflicting claims on tariffs.

Worst-case tariffs see iPhone hit $4k

In a separate piece, CNET has been doing the sums on a number of different scenarios. In the worst case, the cost of the most expensive iPhone in the line-up would exceed $4k.

There are a huge number of unknowns here. On exactly what basis would tariffs be imposed? Would Apple choose to absorb some of the costs, or pass them all onto consumers? What proportion of iPhones could Apple import from India, to avoid the China-specific elements?

All of that makes CNET’s sums highly speculative, but here are a few examples. First, with the 10% tariff applied on imports from India, then the threatened 26% rate. For China, first with the current 30% tariff, and then with the threatened 145%, using the cheapest and most expensive current models as examples:

With the additional 25% tariff Trump has threatened on Apple (and now other smartphone brands):

9to5Mac’s Take

Clearly the upper ends shown would be complete untenable, as nobody would pay those prices. A Trump advisor has suggested that Apple would absorb 100% of the increases, but that too would obviously be impossible at the higher rates.

I’ve argued all along that there are three reasons these worst cases won’t happen, and the US Court of International Trade has now added a fourth: they would be illegal.

Highlighted accessories

Image: Apple