Donald Trump he had announced it – as always – on Twitter: "the agreement with China is very close". And so it seems that it is happening, at least to avert the wave of duties that should start would have had to start on December 15, or Sunday.
In these cases it is mandatory to use the conditional: we are only at "Step one", as it has been called, or to aoffer of agreement to reduce – and subsequently cancel – existing and expected duties. If everything goes the right way, even the painful issue of the Huawei ban could lead to unexpected twists until a few days ago. And there are those, like Bloomberg, already reasons on the economic effects on the main ones player – in this case Apple – and, consequently, on product prices. Let's go with order.
TOWARDS A USA – CHINA AGREEMENT
Getting VERY close to a BIG DEAL with China. They want it, and so do we!
– Donald J. Trump (@realDonaldTrump) December 12, 2019
The opening is for the tweet of Donald Trump yesterday: with his words you already understood that the White House and Beijing were close, perhaps never like now. Then came the "confirmation" (unofficial, for now, but we'll know more today): the American President has signed a document in which thetrade agreement to halve the existing duties on Chinese products (for a total of 360 billion dollars) and eliminate those of 15% planned for noon and 1 minute on December 15 (goods for 160 billion dollars, including smartphones and PCs). The offer was delivered through the Chinese embassy in Washington.
And why would the US take a step back by proposing trade peace with China? Simple: the agreement provides that, in exchange, Beijing commits to
- double the purchase of US agricultural products (from the current 25 to 50 billion dollars), especially soya and pork
- better protect intellectual property
- open the financial services market
With this do ut des could reach the coveted (against) signature: some attempts to complete the Step one they had already been carried out months ago, but without success. But now it seems that the times are more mature, especially because the deadline of December 15 is around the corner.
If ever the Step one should it fail, it seems however that the date of December 15 can be moved forward, so that the counterparts have time to file the agreement and find a common point. However, the mouths remain sewn both in the USA and on the other side of the Pacific Ocean.
APPLE – AND CONSUMERS – THANK YOU
The success of the Step one would avoid the increase in prices of Apple products. This is underlined once again by Bloomberg reporting the estimates of Dan Ives of Wedbush Securities: according to the analyst, the application of duties would have caused an increase in the price (we are talking about price, not cost) of $ 150 for iPhone, a change that would have had a significant impact on sales during the Christmas period
"An early Christmas gift to Apple from Trump": this is how the analyst defines the agreement (expected). For its part, the Cupertino company would have found itself at a crossroads:
- keep prices unchanged with profits down 4% per share in 2020
- increase prices with a consequent drop in demand of 6-8% in 2020
However, both policies would have led to negative effects, and the success of the Step one would allow Tim Cook to avoid difficult and unpopular choices (for shareholders on the one hand, for consumers on the other). What is certain is that the ongoing commercial crisis between the US and China has revealed how much – but not only – Apple depends "too much" on the Asian country. Today it seems to have worked, but it is said that the strong activities of lobbying conducted by the CEO in person to convince Trump to back off can be effective in the future.