On October 10, 2025, Trump posted a message on his personal social media, claiming to impose an additional 100% tariff on China on November 1, 2025. Trump's exact words are roughly as follows (I edited some of them):
Trump: Just learned that China has taken a tough stance on trade issues, claiming that it will impose export controls on products it produces and products not produced by it from November 1, 2025. Based on this position, I would like to announce on behalf of the United States that starting from November 1, 2025, the United States of America will impose a 100% tariff on China, that is, an additional tariff on top of any tariffs it currently pays. Similarly, starting from November 1, 2025, we will also implement export controls on all critical software.
China has recently announced new export control measures, but the items are limited to only some super-hard materials, rare-earth materials and related equipment, which is not as exaggerated as Trump says.
At the same time, China announced new export control measures with good reason, simply in order to safeguard national security and interests, and in accordance with international practice.
Through the current round of Sino-US trade war that started in April this year and continues to this day, we have become very clear that the trade war itself is only a means for Trump to put pressure on China, not an end itself. As for Trump's purpose, I have already discussed it in some articles. Therefore, the increase in tariffs this time naturally means that during the negotiations between China and the United States, there were some temporary setbacks. For example, both sides were unwilling to compromise in some aspects.
Then, we also responded to this move of Trump, and answered three journalists' questions, of which the first question, the Chinese side used only one word, let Meiji be silent, let us see.
The journalist’s question is: On October 10, the U.S. announced that China will impose a 100% tariff on China's export controls on rare earth and other related items, and implement export controls on all key software.
We respond to this: for a long time, the U.S. has widespread national security, abused export control, discriminatory practices against China, unilateral long-arm jurisdiction measures on semiconductor equipment, chips and other products, the U.S. control list items more than 3,000 items, and China export control list items only over 900 items. The U.S. has long been using export control minimum content rules, low to 0%, the U.S. related initiatives seriously harm the legitimate rights and interests of enterprises, seriously impact the international economic order, seriously undermine the security and stability of the global supply chain. especially since the September China-U.S. Madrid economic and trade talks, in less than 20 days, the U.S. continued to increase a new series of restrictions against China, will include many Chinese entities in the export
We just put out the facts, and repeat what Meiji has done, and it has achieved the effect.
The other two questions are:
Q: On October 9, the Ministry of Commerce and the General Administration of Customs issued an announcement to implement export controls on relevant rare-earth items.
A: The Chinese side has issued export control measures on rare earth and other related items, which is the Chinese government's legitimate practice to improve its own export control system in accordance with laws and regulations.The current world situation is unstable, military conflict has occurred, the Chinese side has noticed that medium-sized rare earth related items have important applications in the military field.China is a responsible big country, implementing export control of related items in accordance with the law, the aim is to better maintain world peace and regional stability, and fulfill international obligations such as anti-proliferation.
China's export control is not a ban on exports, and compliance applications will be authorized.Before the measures were announced, China has notified relevant countries and regions through the bilateral export control dialogue mechanism.China is willing to strengthen export control dialogue and exchanges with countries to better safeguard the security and stability of the global supply chain.
Reporter: We have noticed that the Ministry of Commerce recently issued an announcement to strengthen export control of rare earths and other related items. How will it be implemented in the follow-up?
A: China, as a responsible big country, has always firmly safeguarded its national security and international common security, always adhered to the fair and reasonable principle position, prudently and moderately implemented export control measures. China has previously fully assessed the possible impact of the measures on the supply chain, and is convinced that the relevant impact is very limited. Prior to the introduction of the measures, China has informed relevant countries and regions through the bilateral export control dialogue mechanism. Subsequently, the Chinese government will conduct license review in accordance with the law, grant license for applications in accordance with the regulations, at the same time, actively consider the application of various facilitation measures such as general license, license exemption, and other, to effectively promote compliance trade. I want to emphasize that China's export
In this article, I will analyze the Trump administration's tax collection.
1
The White House official website has details of the goods subject to tariffs (the table below). This detail is very long. I intercepted a paragraph so that everyone can have an intuitive feeling. This detail does not represent all goods on which the United States imposes additional tariffs in this round, but it already covers most goods. On the right side of the details are the specific product name and its description.
List of types of goods on which the Trump administration imposes tariffs in 2025
After making statistics on the above-mentioned commodity categories, I found that Trump imposed tariffs on about 600 commodity categories this time (there are many more commodity categories), of which industrial products (including upstream, midstream and downstream) accounted for 96.7% while agricultural and forestry products accounted for only about 3.3%. Please see the table below for the results.
Analysis of commodities that the Trump Administration will impose tariffs in 2025
In addition to the above-mentioned taxation target countries or regions and the types of taxed commodities, there is another key point, that is, the tax rate. The White House also published a detailed tax rate table for each category of commodity. There is a lot of content, and I intercepted and translated a paragraph.
The string of numbers under the number of the first column on the left of the table below, 9903.01.25, corresponds to a series of specific commodities, all of which apply a right-hand tax rate, i.e. an additional 10% tax rate based on the previous relevant tax rate.
Trump administration to impose tariffs by 2025
If we continue to browse down the tax rate table, we will find that the tax rates corresponding to different numbers are increasingly higher and higher until the added tax rate of the following set of goods, number 9903.01.76, reaches 50%.
Trump administration to impose the highest commodity tax rate in 2025
In this way, we have a general understanding of the countries or regions, types of commodities and tax rates of various commodities where the United States imposed tariffs this time.
Then I will select a commodity and carefully look at what will change before the tariffs are imposed.
Let's take the iPhone as an example. As we all know, the Trump administration's additional tariffs this time will have a great impact on the entire iPhone industry chain.
After carefully analyzing the catalogue of tariff goods, I found that the U.S. government's determination to return the production line of Apple's flagship products to the United States this time is really quite great. Tariffs have been imposed on almost all major raw materials, basic materials, intermediate products and even assembly and supporting products in the upper, middle and lower reaches of the whole iPhone production chain (some major products are listed in the table below).
In 2025, the Trump administration will impose tariffs on parts of the iPhone industry chain.
The following table shows that the iPhone will always be Apple’s flagship product from 2022 to 2024.For example, net sales in 2024 reached $8.3 billion in 2011, accounting for 51.45% of total sales.
Net sales of Apple products from 2022 to 2024
Since our focus is to understand the impact of an increase in tariff rates on the price of a specific commodity, we can simplify the analysis as much as possible. Let's take a relatively low-tech component on the iPhone, such as a phone case, as an example for analysis.
At present, many enterprises in China and Southeast Asian countries (such as Vietnam) are producing iPhone cases.
We take Vietnam as an example.Nuclear industrial district in Northern Jiang Province of Vietnam, Foxconn in Shenzhen industrial district and other parks, communications precision in Northern Ning Province, and the joint factory in the VSIP industrial district of Northern Ning Province, are the main force in the production of cell phone shells.
Foxconn, Yunzhong Industrial Zone, Bac Giang, Vietnam
Apple CEO Cook at Foxconn's foundry in Vietnam
Before continuing, we need to have a brief understanding of labor theory of value. Suppose a simple economy where commodity prices are exactly equal to value without deviation; and there are only capitalists, factories, machines, raw materials, employees and products in this economy.
Suppose the factory has 10 machines, the total price of 5 million yuan, the daily loss (i.e. depreciation) of 4,000 yuan value; 100 workers each pay exactly 150 yuan per day, the total salary of 1.5 million yuan per day; 1 ton of raw materials, the price of 20,000 yuan, all consumed per day.
In this way, after, for example, 10 hours of labor a day, 100 workers produced 100 final products with a total price of 49,000 yuan.
In the price of the four hundred thousand yuan of the product, which contains four thousand yuan of machine deductible value and twenty thousand yuan of raw material value, this twenty-four thousand yuan of value is completely transferred into the product, and is reflected through the price of the product; in addition, the 15 thousand yuan wage spent by the employed workers by the factory owners has been re-produced by the workers within the necessary labor time, and this 15 thousand yuan of value has also entered into the product; and, finally, the 10 thousand yuan, is the profit of the factory owners.
That is, if all 100 products are sold the next day, the factory owner can earn 49,000 yuan. Among them, 39,000 yuan is to compensate for the capital he invested in the early stage, including the depreciation value of machines of 4,000 yuan a day, the value of raw materials of 20,000 yuan and the value of labor of 15,000 yuan. The remaining 10,000 yuan is his net income, that is, profit.
Work value theory, understand this is enough. we go back to the topic of this article.
The process of producing iPhone phone case at Foxconn factory in Vietnam generally requires four processes: raw material processing, surface treatment, functional component integration, and quality inspection.
To further simplify the analysis, we take the example of a working day (10 hours) and simplify all capital investments into raw materials ( raw materials), labor investments (wages) and production tools (machines).
At the same time, all output of capital is broken down into compensation for the input of raw materials, labor and production tools, as well as profit.The so-called output of capital refers to the total amount of products produced by the worker a day, and the total amount of money sold.
The difference between capital output and capital input is profit.
For the production of the iPhone shell, we first look at the investment of capital in raw materials.The largest part of this investment is the money spent on the importation of half-finished (middle product) mobile phones in Vietnam.
At present, most products in international trade are not produced by a certain country alone. In particular, high-precision electronic products such as iPhone should be produced through international division of labor. It is impossible for us to discuss the theory of international division of labor here (for this part, please refer to my article "What is the Essence of the Sino-US Trade War", the second half of which deeply analyzes the international division of labor in the chip industry).
The following table shows the international division of the production of an iPhone in a very simplified way. The Vietnamese Foxconn production of the iPhone shell is one of the final links of the international division of labor. Before the beginning of this link, an iPhone was already produced in other countries in the form of a semi-finished or intermediate product.
Vietnam needs to import these semi-finished iPhones first, then process them (including the production of phone case), and partially assemble and test them, and then export these still semi-finished iPhones (the technical term is called re-sales) to China and India to complete the assembly of the whole machine, and then ship them in China and India to be sold to importers around the world. Finally, they appear on the shelves of retailers in various countries for consumers to purchase.
Global iPhone production division (simplified)
In this process, the income earned by Vietnam mainly comes from the value added generated between importing semi-finished products and exporting semi-finished products. For example, based on current market conditions, the price of a semi-finished iPhone imported by Vietnam from China is around US$500, with an average of 3000 semi-finished products imported every day.
Note that we are just simplifying the discussion here, with the aim of understanding the impact of tariffs on commodity prices, rather than studying the processes of the industrial chain. So while the reality is much more complicated, for example, some generations of factories do not import whole-machine semi-finished products, etc., the reason is similar.
After the semi-finished products are imported into Vietnam, the Vietnam OEM factory conducts OEM work, objecting the value of labor into the products and producing new value (value-added). These value-added value through labor are equally distributed to each iPhone, which is about US$6 to US$8.
After the processing is completed, Vietnam returns the processed semi-finished products to China at a price of $520 each, earning a difference of $20 each (the reason is $20 instead of $6 to $8 because policies such as the RCEP agreement gave Vietnam tariff preferences).
In addition to the expenses spent by Vietnam on importing semi-finished mobile phones, part of the raw material investment is the purchase of productive raw materials.
Raw materials are needed to produce a phone case. Foxconn's factory has imported raw materials such as semi-finished mobile phones, but it also needs to purchase raw materials specifically used to produce phone case. Therefore, before processing, Foxconn factories will first purchase aluminum ingots from upstream companies. Since aluminum ingots are not produced by Foxconn, but by upstream companies, the cost of purchasing aluminum ingots is included in Foxconn's cost of purchasing raw materials.
According to the current market price, the aluminum shell used to produce the iPhone cell phone shell is about $3 / kg. At the same time, 1 kg of aluminum shell, on average, can produce 27 iPhone cell phone shells. Foxconn as the head generation plant, on average can produce about 130,000 iPhone cell phone shells per working day, consuming about 4,815 kg of aluminum shell, worth about $1,45 million.
In addition to purchasing intermediate products and aluminum ingots, the factory also needs to invest in other raw materials, which must be included in capital investment. Roughly speaking, the average total value of raw materials for iPhone phone case invested by a Foxconn OEM in Vietnam with a size of 4500 people is about US$120,000 per working day, which is about US$37.44 million per year (calculated based on 312 working days per year, the same below).
Then let's look at the investment of capital in labor. At present, the average hourly salary of workers producing iPhone phone case at Foxconn factory in Vietnam is about US$1.50. Based on 10 hours per working day, the daily salary is about US$15 and the monthly salary is about US$390. This data is the rough result of calculation after weighting the different hourly salary levels of ordinary operators, technical operators, and team leaders, calculating overtime into an hourly salary structure of basic salary plus piece-rate commission, and taking into account factors such as production seasons and peak seasons.
The following table further details the specific process of workers 'labor and the amount of added value in each process. Of course, this is just a rough process. The division in real production is more detailed, and it is just convenient for everyone to understand.
For example, a polisher in Foxconn factory, in the process of polishing the iPhone case, his labor force was objected or transferred to the mobile phone case, forming a value increase. This part of the value increase, converted into money, is about $1.2 per mobile phone case at the current market price.
The same applies to other processes, in which, after each process, the labour of the worker is processed, new amounts of value are added, and the increase of these amounts of value is expressed as price growth (this is because we have assumed in the previous text that the price of the commodity can fully reflect the value of the commodity, and that the two are not divergent).
Approximate production process of Foxconn iPhone case foundry in Vietnam and incremental value of each process
The Foxconn Shell Factory employs about 4,500 people (no managers included), so the capital is invested in the value of the labor force in one working day, about $6.75 million ($1.5 per hour x 10 hours x 4,500 people), about $210.6 million per year.
We then look at the investment of capital in the means of production.As mentioned above, the investment of the means of production can be understood as the amount of depreciated machine value.
For example, if a machine worth 100,000 yuan runs non-stop within a 10-hour working day and loses one-thousandth of its value, that is, 100 yuan, we can say that during that working day, the investment of capital in the machine (that is, the means of production) is 100 yuan.
At present, the daily depreciation cost of the production materials of Foxconn mobile phone case foundry in Vietnam is about US $100,000, which is about US $31.2 million per year.
Adding up the above three items, we can find that the total capital invested by a Foxconn iPhone phone case foundry in Vietnam with a scale of 4500 workers is approximately US$287,500 per working day (10 hours), and the total capital invested every year is approximately US$89.7 million (we assume that the amount of capital investment per working day is constant, the same below).
After the capital investment, then the capital output. The single price of the cell phone shell at Foxconn Cellular Shell Factory in Vietnam is about $2.5 USD. Calculated by the production of 130,000 cell phone shells a day, and assuming these products can be sold out, the day sales are $32.5 million (annual sales are about $1.14 billion). Excluding the $28.75 million capital investment, the daily profit is $3.75 million, the annual profit is about $11.7 million.
That is to say, if the Foxconn factory belongs to a capitalist, then all that happens is that he takes out $89.7 million in capital a year, imports raw materials, hired workers, bought machinery, then hired a management (manager) to oversee the workers’ production of cell phone shells. a year of working 312 days, produced a total of 4.56 million cell phone shells worth approximately $1.01.4 million, then sold these cell phone shells in return or direct sale, recovered funds, then deducted the cost of $89.7 million he had previously invested, and eventually lost a net profit of $11.7 million.
But our capitalist was not very lucky. While his career was booming, an economic and political figure suddenly emerged from American politics: Mr. Trump. Your good days are coming to an end, gentlemen, good luck.
This gentleman solemnly declared to the world after his second term as president: For the sake of democracy, unity, freedom, and fraternity, the United States has decided to launch an unprecedented trade war against the world.
Let’s see below how Trump’s launch of a trade war will affect our unfortunate capitalist.
2
As we said above, Vietnam is not the producer of finished iPhone products, but China and India are. In fact, the finished iPhone products produced by Vietnamese factories only account for about 1% of the world.
But to facilitate the analysis, we assume that this Foxconn plant in Vietnam produces the finished iPhone. Factory workers assemble and test the finished product directly after the phone shell is produced, and sell the finished product directly to the United States after the factory.
To understand the impact of the Trump administration’s tariffs on this capitalist, we need to move our eyes from Vietnam to the United States for a while.
The Trump administration’s reciprocal tariffs on Vietnam came into effect on April 9, 2025 U.S. Eastern Time. Any iPhone entering the U.S. after this moment will be charged a tariff of 54% (8% plus 46%).
First of all, when we say that the United States imported a batch of iPhones from Vietnam, we are actually saying that the American importers bought the iPhone from Vietnam.
Currently, the importors responsible for importing iPhones to the U.S. mainland are mainly Apple, for example, 90% of iPhones imported from the U.S. from the world in 2024 will be directly imported by Apple.
此外，苹果公司还会将少量进口份额，委托给一些运营商或零售商，比如AT&T和Verizon、Best Buy等等。极少数iPhone会通过苹果公司委托的其它第三方贸易商进口。这两部分进口商所进口的手机数量占进口总量的不到10%。
Then we look at how the Trump administration specifically imposed tariffs on the iPhone. we take the Apple iPhone 16 Pro Max on the Amazon website as an example, this phone varies according to configuration, retail price between $ 1100 and $ 1,600, we are below for this $ 1149.99 (five in $ 1150).
Amazon's official website sells for $1,149.99 Apple iPhone 16 Pro Max
It should be noted that when the U.S. federal government calculates the tariff amount, it does not use the retail price as the benchmark, but the CIF price as the benchmark. All you need to know is that an iPhone that retails for $1,150 has a CIF price of about $620. The price of a commodity obtained after imposing tariffs on the CIF price is called duty-paid value. The calculation formula is:
For example, before the U.S. imposed tariffs on China, the total tax rate was 20%, the tax price was $ 744 and the amount of tariffs was $ 149.
After the U.S. imposed tariffs on China, the total tariff rate turned to 54%, the tax price turned to $955 and the tariff amount changed to $335 ($955 minus $620).
If the total tax rate is as high as 104%, the duty-paid value becomes US$1,264.8, and the tariff amount is US$644.8.
Then, let’s take an example.If Apple imported 100,000 iPhones on April 10, 2025, the day after the tariffs came into force, the total value would be $62 million (calculated from the price of landing).
Before the goods enter the U.S., Apple must submit an electronic declaration to the U.S. Customs through ACE, the U.S. Customs Automation System, and must fill in details such as the description of the goods, the value of the goods, and the tariff classification.
When filling in this tax classification information, there is a column to fill in the import tax rate, which includes the tariff rate. Since the declared value of this batch of phones (i.e. the price of landing) is $62 million, here does not take into account the basic tax rate, only the tariff rate of 54% can be calculated, the tariff amount is about $33,48 million.
Let's do the same here. For the time being, assuming that Apple pays all tariff costs, after successful payment, it will receive Form CBP7501 issued by U.S. Customs, which lists the payment details in detail. The customs ACE system will then send an electronic release order to the port. It takes about 2 to 3 hours from paying the customs duties to releasing the goods. About 85% of the huge tariff paid by Apple went to the U.S. federal government, and 15% remained at U.S. customs as operating expenses.
The duty declaration procedure is roughly the same. You must have seen that the most important step in the whole process can be summed up in three words: who pays.
This is the key to the impact of tariffs on commodity prices.
According to U.S. law, the registered importer (IOR) is the statutory tariff payer. That is to say, no matter how the importer distributes the tariff expenses, the final tariff funds are paid from the account of the registered importer to the U.S. federal government account. Since in our example the registered importer is Apple, it can only be paid through Apple.
In reality, almost no company is stupid to bear all the customs expenses on its own, and they are always distributing and transferring customs costs as much as possible through various methods.
Typically, Apple divides costs between itself, consumers and suppliers.To simplify the analysis, we use the mathematical method of analyzing the limits, assuming all tariffs are distributed entirely by any of the three parties, and see what happens.
It should be noted that in reality these parties are always jointly distributed according to a certain proportion, we are here only to discuss convenience.
First, assume that all tariffs are borne by Apple itself.In this case, Apple can pay by cash reserves, cash reserve investment returns, short-term securities sales, and government bonds.
The table below shows Apple's balance sheet in 2024. It can be seen that in 2024, Apple's total assets will be US $364.98 billion, and its total liabilities will be US $308.03 billion. When paying tariffs, Apple can only use some liquid assets, especially cash and cash equivalents and some securities. Other current assets, such as accounts receivable, etc., involve the payment time of suppliers, so they are not considered here.
Among them, the value of cash and cash equivalents is US$29.943 billion, which can be used to pay tariffs; the value of marketable securities is US$35.228 billion, which can be quickly realized through the sale of securities, so the total value of the two parts of current assets is US$65.171 billion.
Apple’s balance sheet for 2023 and 2024
Calculations show that the amount of tariffs Apple needs to pay for this shipment (US$32.4 million) only accounts for 0.05% of the US$65.171 billion.
However, Apple imports as many as 1,2 million iPhones a year, and if the import tariff rate is set to 30% only, Apple will pay up to $223,2 billion a year for this, roughly equivalent to about 34% of the total value of its liquid assets that can be used to pay tariffs, and it will take only about 1065 days (less than three years) to run out of liquid funds without considering other circumstances.
Moreover, on the premise that Apple bears the cost of tariffs alone (without raising retail prices and passing on tariff costs to suppliers), an increase in tariffs will also lead to a compression of Apple's profits.
For example, under the previous assumption (i.e. before the U.S. imposed tariffs on China, the total tax rate was 20%, the tax-expired price was $ 744 and the tariff amount was $ 124), we know that we deducted the tax-expired price by $ 1,150 in retail prices, a mobile phone's mass profit was $ 406, and then deducted other costs (such as marketing and channel fees, after-sales services and logistics fees, etc.) about $ 150, the net profit was about $ 256.
And after the U.S. imposed tariffs on China, the total tax rate turned to 54%, the tax price turned to $955 and the tariff amount changed to $335 ($955 reduced to $620). We deducted the tax price by $1150 in retail prices, and the profit of a mobile phone decreased to $195, and after deducting other costs, the net profit remained only about $45 and decreased by 82.42% from $256. That is, under our premise, the increase in tariffs would result in Apple's net profit decreased.
Obviously, it is unrealistic for Apple to pay tariffs alone. Because this will cause its current assets to be quickly exhausted, while its profits will be severely compressed.
Secondly, assume that all tariffs are borne by consumers. Under this circumstance, if the United States imports 120 million mobile phones every year, the CIF price of each mobile phone is US$620, and the import tariff rate is set at 30%, then the calculation shows that after adding tariff costs, the average tariff amount per iPhone is US$186, the duty-paid value will reach US$806, and the retail price will increase from US$1150 to US$1336.(Because all tariff costs were passed on to consumers, the tariff price of each mobile phone was increased by US$186 based on the original retail price of US$1150, so the retail price rose to US$1336).
From a realistic point of view, China's annual exports of iPhones to the United States account for about 70% of American imports, about 84 million units. Under the above premise, if the Trump administration imposes a so-called reciprocal tariff rate of up to 54% on these mobile phones, the tariff amount of each mobile phone will be as high as $335. When Apple spreads all tariff costs to American consumers, the price of each iPhone will increase by $335 to $1,485 on the basis of $1,150, an increase of nearly 30%.
What does this mean? Morgan Stanley recently calculated that if the retail price of iPhone rises by 30% to 40%, the demand in the US domestic market will drop by roughly 25% to 30%. If we take Apple's annual import of 84 million iPhones from China as the benchmark, and calculate that the retail price increases by 30% and the demand decreases by 30%, the annual sales volume of iPhones imported from China will roughly decrease by 25.2 million units to 58.8 million units, which will lead to a sharp decline in Apple's annual net sales and net profit.
Therefore, it is unrealistic for Apple to pass on all tariff costs to consumers. Because of this, although it can rely on the return of funds after raising product prices to pay tariffs in a short period of time, without using its own working capital to pay, as long as it takes for a long time (such as half a year), it will lose a large number of buyers because the product price is too high, which will lead to a sharp decline in sales and profits, which will soon backfire on the company itself.
Finally, it is assumed that all tariffs are borne by the supplier. In this case, the Foxconn capitalist above us is finally coming on stage.
You should remember that as we mentioned above, this Foxconn capitalist spends $89.7 million in capital a year, imports raw materials, hires workers, buys machinery and equipment, and then hires a management (manager) to supervise the workers' production of mobile phone cases. After working 312 days a year, a total of 40.56 million mobile phone cases with a total value of about 101.4 million US dollars were produced, and then these mobile phone cases were sold in the form of resale or direct sales, and the funds were recovered. Then, after deducting the cost of 89.7 million US dollars he had previously invested, he finally made a profit of 11.7 million US dollars.
So how would Apple transfer customs costs to him through a cost-sharing agreement?
The agreement, which was signed simultaneously between Apple and suppliers at all levels, is intended to legally force suppliers to bear part of the customs costs when tariffs rise.
This kind of agreement is of course unequal, but there is no way. The iPhone division of labor undertaken by Vietnam is located in the low-end field, and there is not much room for demands. If Foxconn dares to refuse Apple's coercion, Apple will threaten Foxconn by canceling future orders and demanding compensation (20% of Foxconn's annual sales). In this situation, Vietnam, as a small country, is difficult to support Foxconn. If you take any effective actions, Foxconn can only compromise in the end.
As we said, the income that Foxconn foundry in Vietnam, which produces iPhone cases, can earn mainly comes from the value-added between imported semi-finished products and exported semi-finished products. For the factory, this value-added amount is basically equal to the new value of the iPhone case it produces.
According to our previous assumption, the factory produced an average of 130,000 (4.56 million a year) cell phone shells per working day, with a single shell price of about $2.5, assuming that these products could be sold out, a daily sales of $32.5 million ($1.014 billion a year), deducted a daily capital investment of $28.75 million, and a daily profit of $3.75 million.
That is to say, if we assume that an iPhone is sold directly to the United States as a finished product after coming out of this Foxconn factory, and all the 40.56 million mobile phones shipped by this Foxconn factory every year are imported by Apple, then Apple will pay $101.4 million to Foxconn factory every year, which will flow from Apple to Foxconn.
So how does Apple pass on the cost of tariffs to Foxconn? Naturally, it has to pay it a smaller amount, which is to push down the $101.4 million in money this year. In this way, Apple's spending will be reduced, but what will naturally be Foxconn's revenue.
Apple, for example, would require the Foxconn factory to reduce the single price of the phone shell from $2.5 to $2.2.
It is estimated that this would result in the factory’s daily sales falling from $32.5 million to $28,60,000 (130,000 x $2.2).
At the same time, we know that the single-day capital investment, that is, the production cost of this factory, is US $287,500. As a result, daily sales ($286,000) were 0.15 million less than daily production costs ($287,500). Our capitalists are losing money.
Because his daily profit was not dropped from $3.75 million to zero, but dropped to $0.15 million, that is, he would have to pay himself every day to fill that $0.15,000 gap.
In reality, no capitalist would do this.
In other words, what does this capitalist need to do to at least guarantee that he will not lose, or even keep his profits unchanged, when daily sales fall to $28,60,000?
To know this, we need only look at the components of the daily production cost at this Foxconn factory.
As we said above, in order to simplify the analysis, we reduce all the inputs of capital to raw materials (raw materials), labor inputs (wages) and production tools inputs (machines).
The answer is obvious. This capitalist can only reduce capital investment in raw materials and production tools, as well as lay off employees and lower workers' wages. Bottom line: Significantly reduce the size of your business.
Let's take layoffs as an example (everything else remains unchanged). If this capitalist still wants to maintain daily profits at $37,500 even though daily sales have dropped to $286,000, he will have to reduce production costs, from $287,500 per day to $248,500.
Since we assume that the rest remains unchanged, this means that the capitalist invests US$120,000 a day in raw materials and US$100,000 a day in means of production, or a total investment of US$220,000, remains unchanged.
When the daily production cost is compressed to US $248,500, it is also necessary to ensure that US $220,000 is invested in raw materials and means of production every day, which means that only US $28,500 is left in the capital used to pay workers' wages every day.
If we assume that workers 'daily wages remain unchanged at $15, it means that this $28,500 is only enough to pay the wages of 1900 workers. As a result, the capitalist will have to lay off 2600 employees.
It should be noted that in our analysis of Apple's transfer of tariff costs to Foxconn factories, the premise is that only this Foxconn factory shares all tariff costs passed on by Apple. But in reality, Apple's suppliers are all over the world, so each supplier will share some of them, which will not actually cause such a huge impact on an enterprise (one-time layoff of 58%).
In this way, we have clarified what the consequences would be if all tariffs were distributed entirely by any of the three parties (Apple, consumers, suppliers).
In reality, the above three extreme situations rarely occur, and the vast majority of customs costs are all distributed between Apple companies, consumers, suppliers, etc. The specific distribution depends on the outcome of the game.
But on the whole, the strength of these three is relatively decreasing, with Apple the strongest and consumers the weakest. Therefore, the consumer group is often shared the most, but it is just a group sharing, so each consumer does not have a particularly strong feeling of being shared.
However, no matter how distributed, the cost of tariffs, actually increased. at the same time, the cost increases, the value of the Apple phone itself, and not in proportion to the cost increases, synchronously increased, this is because of the quality of the iPhone itself, and nothing changed.
When consumers pay a much higher price, but only buy the same product as in the past, they are definitely reluctant to buy it again.
At this point, I think all readers and friends have already had their own thoughts on what tariffs are, or what the essence of tariffs is. The essence of the U.S. government's imposition of tariffs is to forcibly deviate the value and price of commodities, occupy the profits into the hands of big capitalists, and let ordinary people bear the price.
Suppose a phone, without a HD camera, sells for $200. Later, the manufacturer sought research and development, launched a HD camera, went on, and the price mentioned $250.
The essence of this price increase of $50 is that the mobile phone has an extra high-definition camera. In this camera, the painstaking efforts and labor of a large number of basic scientific workers, engineering R&D personnel and engineers, technical backbones, workers, managers, etc. are condensed.
In other words, the reason why the price of $50 will increase is that the original mobile phone without high-definition camera has a new value equal to $50.
Well, now the tariffs are coming, and the U.S. government has announced a $50 tariff on that phone without a HD camera.
This means that there is no new human labor gain in the phone, no new value gain, but in the price, but $50 more in emptiness.
This deviation is also the root cause of inflation. We always say that increasing tariffs will increase inflationary pressure, and that's why. Because increasing tariffs is equivalent to increasing the price of commodities out of thin air when there is no new value of commodities themselves, which makes the price and value deviate, resulting in the same value and a substantial increase in prices, thus leading to inflation.