Insight into Apple and Walmart's Tariff Responses
Despite the risk of rebuke from the U.S. President, the tariff response from Walmart (WMT) and Apple (AAPL) is telling. On the supply chain side, Apple will not likely shift iPhone production to the U.S.
Apple is moving its iPhone production out of China to India. It would avoid punitive tariffs that its U.S. customers would end up paying. However, President Trump urged Apple CEO Tim Cook to increase production in the U.S. Currently, the company does not have any smartphone manufacturing facilities in the U.S. China still produces most of its iPhones.
Capitalism would prevent Apple from changing its operations. Apple maximizes profits by producing in the lowest-cost countries.
In the retail sector, Walmart said that tariffs would cause prices to increase later this month and by even more in June. Last Saturday, May 17, the President said that Walmart should stop blaming tariffs for the price increase. He wanted both Walmart and China to “eat the tariffs.”
In the first quarter, Walmart posted strong results, earning $0.61 a share. Revenue of $165.6 billion increased by 2.5% Y/Y. Unfortunately, Americans will face higher prices as tariffs raise costs on the supply chain. Walmart must preserve its profit margins by passing most, if not all, tariff-related costs to customers.
