To look at things more simplistically, even if Trump imposes a 25% tax on smartphones, it is unlikely that companies will move their production to the U.S. According to reports, Apple Inc. (NASDAQ:AAPL) already examined the opportunity to manufacture its phones in the U.S., but its manufacturing contractor Foxconn estimated that the costs for an iPhone would more than double. To minimize the costs, companies may increase their investment in plant upgrades and use more robots and automation, which won’t create as many jobs as Trump supporters might expect. On the other hand, since most parts are still manufactured in East Asia, the resulting costs in parts shipping will substantially raise the prices of final products. Some estimates say that an iPhone could cost as much as $2,000 if it were to be made in the U.S. In this way, Apple Inc. (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOGL), and Microsoft Corporation (NASDAQ:MSFT) might face tougher competition from Chinese smartphones, whose quality has been progressively improving and which will be better off even if their prices will carry an import tax. Moreover, if companies raise the prices only on smartphones sold in the U.S., it will likely result in a new shadow economy involving people smuggling smartphones from other countries.
Nevertheless, companies seem to be more accommodating to Trump’s ideas. GM and Ford announced plans to invest in their existing U.S. plants instead of relocating some production to Mexico. Apple and Microsoft also have some plans regarding their U.S. manufacturing. In 2013, Apple started making the Mac Pro in the U.S, but the production volume is small. With Foxconn having started to employ more robots at its Chinese factories, Apple Inc. (NASDAQ:AAPL) might expand production in the States. Last year, Microsoft Corporation (NASDAQ:MSFT) started making Surface Hub, a huge (to be pronounced “yuuge”) touch-screen computer intended as a replacement for traditional whiteboards, in Oregon. Surface Hub costs $20,000 and is too big to be shipped from overseas, so it makes sense for it to be made in the U.S.
However, it remains highly unlikely that we’ll see smartphones made in USA any time soon. Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOGL) and others are likely to shift some production to the U.S., with the majority of it being automated. In exchange they will get tax cuts. Trump will get to brag on Twitter and on TV about what a great President he is for bringing jobs back to the U.S. and when confronted by the press that the new policies don’t work as well as intended, he or his staff will accuse the press of lying or will say they are presenting “alternative facts”
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