A $2,300 Apple iPhone?
It sounds outrageous in 2025. Yet it’s quite possible.
Like many US companies manufacturing in China, in-house or outsourced, “Apple has a tough choice: absorb the extra [new tariffs] expense or pass it on to customers,” as this Reuters article says.
True.
But these companies also have two further choices: move/reshore their production or a combination of these options across their product portfolio.
In any case, it will be a big jolt for many supply chains across several industries.
Some analysts even claim it’s a “black swan” event. I’m not so sure.
A black swan event by definition is unpredictable, thus comes as a surprise.
But the US president, Donald Trump, was extremely vocal about his protectionist leanings during his campaign for his first term as president. He talked openly about the benefits of tariffs and expressed his stance on international trade, especially his desire to shrink the US’s trade deficits and bring back home jobs that had moved to low-cost countries.
He was particularly scathing of China and it’s unfair trade practices—like forced or pressured technology transfer, hidden subsidies that give Chinese companies undue competitive advantage and state-sponsored theft of intellectual property.
Surprised? Hmm…
China’s predatory trade policies and the state’s strong influence in commerce and industry have powered its growth and dominance as the world’s factory, at the expense of fair play.
China has a long history as the Al Capone of violating and circumventing World Trade Organization (WTO) rules.
And that’s no secret.
Donald Trump was simply the first (aspiring) world leader to talk straight about it.
And, love him or loathe him—and I know people in both camps—during the Trump 1.0 presidency we saw his administration walk the talk with tariffs and protectionist actions against countries he’d alleged were “ripping off” the US, notably China.
You’d have to have been living on planet Mars to have missed the US-China trade war that ensued.
And if you weren’t, you’d have to have the memory of a goldfish to have forgotten already.
Prior to the Trump 2.0 presidency, again, he openly expressed his vision of rejuvenating US manufacturing and driving a new jobs boom to liberate the US economy, largely through tariffs and other trade barriers.
So how can anyone now be “surprised” by the new US tariffs?!
Perhaps the only ones really surprised are some smarty pants on Wall Street, in London’s Square Mile, and other similar habitats where product value is undoubtedly created. Pfft.
Blind spots, myopia, tunnel vision
The pursuit of the dollar can sometimes make us blind to reality.
But it’s not just clever people in the financial world who suffer this affliction.
Even those of us mere plebs who earn our dollars in the factories, warehouses and offices of various supply chains worldwide also fall prey to short-sightedness and tunnel vision, often due to organizational cultures, executive attitudes, or custom and practice.
For example, it’s customary for company executives to give cost efficiency (not the same thing as cost effectiveness) high priority. Understandably, procurement people have become obsessed with “cost savings”. Yet our conventional focus on cost savings is often a hindrance to organizational effectiveness.
I remember sharing an illustration of this in Procurement Mojo, about a client I’d recently helped with fixing supply chain performance.
One of the improvements I introduced was a structured supply risk management process.
As I explored the intent with the purchasing manager, and probed deeper into the current key supply base issues, we got round to discussing a massive supply failure risk: the sole supplier of a key production material in Continental Europe was facing severe financial difficulties, so much so that they had halved their factory operating hours and had borrowed from the bank for the first time in 38 years of trading.
Ineffectiveness fosters risks
The risk of a supplier in difficulty with possible business failure is well known to many procurement buyers.
But the sad truth is that this supplier ended up in this situation, ultimately, because my client had squeezed them too hard for materials price reductions.
My client was the supplier’s biggest customer, and the supplier could not afford to lose the business (that was the threat). They had acquiesced to the pricing my client had got from a low-cost country sourcing benchmarking exercise. And for a year or so afterwards the resulting double-digit cost saving brought smiles to many faces in my client’s organization, right up to the group CEO.
But is that true procurement effectiveness? When the net effect of a traditional cost savings-driven action is the creation of a mammoth supply continuity risk?
Perhaps the purchasing manager regarded the risk as a black swan event.
I didn’t.
Any supply chain management professional worth their salt probably wouldn’t either.
In fact, they’d likely avoid or mitigate the risk by taking a wiser approach before, during and after the cost reduction exercise.
That’s what good supply chain risk management entails.
Effective risk management
Western companies like Apple manufacturing or sourcing in China and other low-cost countries should have robust risk registers in place, implemented as part of their offshoring or outsourcing initiatives.
After living through Trump 1.0, surely those risk registers must have been updated to include the risk of further tariffs and trade barriers, alongside related mitigating actions/plans—notwithstanding black swan, grey swan, red swan, or whatever-colour swan.
And, to be effective, some of those mitigations should have been underway already.
For Apple specifically, I can well imagine that that’s what the CEO Tim Cook’s recent overtures in India, while cosying up to China, were about; along with the widely reported stockpiling of product inventories in the US.
After all, he comes from a supply chain management background so understands these issues, and probably better than anyone else in the C-suite.
So if, like Apple, you’re one of those US companies now facing “tough choices” resulting from the new Trump 2.0 tariffs, where is your risk register?
