Will iPhones Get Pricier Under Trump’s Leadership?

As technological use increases, so may the cost of innovation due to the global movement of goods and components. Tariffs have become a large factor in shaping the tech landscape. While their economic intentions are clear, their impact on hardware prices and technological advancements can affect the industry even more.

Understanding Tariffs and Their Application in the Tech Sector

Tariffs are taxes placed on imported goods. Governments use them to control trade and protect domestic industries. While tariffs aim to encourage local manufacturing and reduce dependency on foreign goods, their effects can be far-reaching.

Take the tariffs that Trump has proposed, for example. He promises to place a 60% tariff on imported goods from China, alongside a 25% tariff on imports from Mexico and Canada. Policies like these will pressure trading partners due to the raised costs of foreign products. Because most tech companies purchase raw materials overseas, the sector will likely see a price hike on various products.

The Immediate Impact of Tariffs on Hardware Prices

When a country applies a tariff to imported goods, businesses must absorb the added costs or pass them on to the customer. In the tech industry, profit margins are tight, and production costs are high. Therefore, passing the cost along is usually the reality. This means higher prices for everyday consumers, making already expensive tech products even more unaffordable.

For instance, if the U.S. implements Trump’s proposed tariffs, this would result in significant price increases for popular tech items:

• Smartphones by 26%
• Video game consoles by 40%
• Laptops and tablets by 46%

To put this in perspective, consider how much consumers are already spending on high-end devices. Samsung’s Galaxy S24 starts at $699, while Apple’s iPhone 16 begins at $799. Adding a tariff-induced price hike on top of these figures could push these devices out of reach for many buyers.

For families and individuals struggling to afford these products, such price increases could mean delaying purchases or opting for older, less efficient models. In turn, customers will feel discouraged to upgrade their devices, which slows the adoption of newer technologies.

The Broader Effects on the Technology Sector

When prices rise, the effects impact nearly every aspect of the tech sector:

• Reduced profit margins: For many tech companies — especially startups and smaller businesses — tariffs eat into already narrow profit margins. While larger companies may have the resources to weather these challenges, smaller firms often struggle, limiting their ability to invest in growth and innovation.
• Stifled innovation: Research and development (R&D) drive the creation of new products and technologies. However, companies burdened with increased costs often redirect funds from R&D to cover operational expenses. Over time, this can slow technological advancement, delaying breakthroughs that could benefit consumers and industries worldwide.
• Global competition challenges: Tariffs can weaken a country’s competitiveness in the global tech landscape. Countries with fewer trade barriers become more attractive for manufacturers and tech firms, pulling investment and jobs away from tariff-heavy regions. While this strategy mitigates some business challenges, it often results in a loss of technological leadership.

Strategies Companies Use to Mitigate the Impact of Tariffs

Rising tariffs force the tech industry to rethink its strategies. Although it burdens many businesses financially, companies can use the following approaches to manage supply chains and production.

Shifting Supply Chains to New Regions

Companies may diversify their supply chains and source from new suppliers overseas. For instance, Hasbro — a major toy and game company — has moved its supply chain from China to source products from India, Vietnam and Mexico over the last five years.\

Meanwhile, Apple’s largest manufacturing partner, Foxconn, has moved the production of MacBooks from China to Vietnam. These moves help companies sidestep hefty tariffs, leverage lower labor costs and tap into emerging markets.

Invest in Local Manufacturing

Some companies may invest in local manufacturing and start producing goods domestically. While this strategy requires significant upfront investment in infrastructure and labor, it keeps companies less vulnerable to future trade policy changes.

Negotiating Trade Agreements and Advocacy

Another strategy involves lobbying and negotiating trade agreements to reduce or eliminate tariffs. Industry coalitions often come together to advocate for policies that support free trade and stress the negative impact of tariffs on innovation and economic growth. This approach doesn’t provide immediate relief but can lead to long-term improvements in trade relations and reduced costs.

Managing a Tariff-Driven Tech Market

Tariffs on tech goods present multiple challenges, but the tech sector will work against them to keep rising prices at bay. The main way forward is for governments and the tech industry to collaborate to create trade policies that support economic stability and technological advancement. As such, the industry can continue to deliver the latest innovations that shape the future.

This article was originally published by Devin Partida on HackerNoon.