As we continue to investigate the developing trade dispute between the US and China, we have increased confidence that US-based companies, including Apple, have virtually no risk related to the potential tariff increases. Some more thoughts on this developing story:

• There is a gross misunderstanding regarding the mechanics of these tariffs. The goal of levying tariffs on China is to penalize China-based companies selling competing products in the US. For example, a steel supplier in China is at high risk of increased tariffs because they are competing with US-based steel producers. Similarly, a phone manufacturer like Huawei is at high risk of increased tariffs, given its products compete with the iPhone.
• The guiding principle for US policymakers is to protect US companies. Separately, it is unlikely that China would impose export tariffs on US goods manufactured in China as that would discourage US companies from manufacturing in China.
• The bottom line is we do not believe companies like Apple will be impacted by this latest round of tariffs.

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