How does trade war affects smartphone market

Document Type:Research Paper

Subject Area:Politics

Document 1

Barnes APS620-01 May 7, 2018 Recently, United States has proposed a list of 1,333 tariffs which if it goes through could lead to a trade war. Reports show that this will lead to smartphones made in the U. S and China to cost more. Smartphone brands from China include Huawei and Oppo and whereas that of US is Apple. Latest research from Counterpoint indicates that 74% of US smartphone shipment originated from China. In response, China was forced to respond and has announced tariffs of 128 types of good exported from the US. There could be a reduction in smartphone sales as consumers become less confident to goods from the other countries, that is, in China, anti-iPhone comments are spreading on social media since it is an America brand while in the U. S. Huawei would be hard hit as it has invested heavily to enter U. S market and compete with Apple on sales portfolio of high-end phones. China sells more goods to the US thus could lose a lot more, while the US borrows more from China. In terms of economic effects, the trade war affects both states equally. Critiques claim that Trump started the war without exhausting all peaceful means such as beginning negotiations with World Trade Organizations(WTO) against the existing unfair trade practices1. In the name of American Trade Protectionism, President Trump’s goal is to ensure reduction of trade deficit with China through any means. Chinese decisions include devaluating the currency(Yuan), make it difficult for American to venture in or throw American companies out and reducing direct investment in the US which is an act of war.

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U. S businesses are already feeling the pain of the war as consumers and industries are finding it challenging to access low priced Chinese imports while cooperation can’t sell goods and services to China. Chinese illegal trade practices which have always been ignored by the white house has led to the destruction of millions of local jobs and closure of American factories. However, American consumers ended up paying heavily as manufactures preferred to shed jobs to increase turnover by reducing output. US trade representative, Robert Lighthizer, states that tactics used by Ronald Reagan will not be possible on China since supply chances is a global affair as US producers need a supply of parts which are imported. The aim of the United States of America was to employ restrictions as they protect their domestic technology industries.

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According to the Counterpoint research, 74% of the US smartphone that was shipped in 2017 from China amounted to 130 million unit and so the revenue from Chinese imported smartphone projected to 86% of the summation of the smartphone revenue in the US. The implication of this tariffs could not have done well for the United States of America smartphone market. As a result of the move saw a decline in the telecom industry since 75% of the smartphone in the US comes from the Republic of China and would have likely to prompt the price of the smartphone to scale higher. For instance, when the import duty in India raised, iPhone accessories and the price, spare part and apple watch were all affected. S iPhones and apples will suffer a setback. It will take time to find other markets considering the share of the Chinese market in United States’ total exports.

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Chinese smartphone brands that record significant sales in the U. S market include, Huawei, Oppo, and Xaomi. American brands with majority purchase in China include iPhones and apple. Trump’s trade war on China could likely affect producers from different countries caught in between. The U. S government announced that even though China would be a priority for imposing tariffs, other American trade partners that engage in biased profession practices such as unlawful export grants and manipulation of legal tender would fall victim to the trade war. The affected companies would record low sales due to high prices in both American and Chinese markets. This could significantly reduce supporting profits. S could lower sales of Chinese iPhones while the Chinese on the other side label Apple as an American brand. Also, such tensions could result in the unavailability of imported smartphone parts or scarcely available.

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The primary victim of this setback is the multinational producing companies and would prefer that there be a fair play in the market. Smartphone producers are forced to retreat to low production or hibernate their products in the event of the trade war. Apple, a multi-national company, will produce fewer phones as the U. S and competes with Apple in mobile market shares. The pronouncement made by the Best Buy, an American retailer, claimed that stop taking smartphones from Huawei had no clear relation with the threat in the trade war and as a result, before the new tariffs are made public by either the Chinese or the US products from Chinese business may scale up5. The Chinese smartphone in the market has with the increased tariffs has prompted the entry of names such as Samsung and Apple in the market6.

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However, the professionals in the technology argue that the sales of both the smartphones made in US and China are likely to cost more and because of the threat of tariffs and there would be less sale outcome. It is evident that the market of the smartphone is more affected by the increase of the tariffs whereby the increase in import duty pose a challenge and thereafter makes it expensive for consumers to purchase the product and so, by end of the day the sale outcome of the smartphone brand will be less. S market account for 1. of all exports and American smartphone exports accounted for 5. of Chinese handsets. Taxes from Chinese imported smartphones make up for 86% of total smartphone revenues in the U. S. For example, due to Sino-US tariffs, anti-iPhone comments are spreading in China8.

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The Chinese consider apple as a bellwether American brand; this would affect the sales of Apples and their accessories all over China. In a retaliatory motion, Huawei a Chinese product would face acceptance challenge in the American market. Consumers would also have a little range of products to choose from. They would also be limited to internally manufactured smartphones are they are available and cheap, unlike imported phones which are overtaxed and scarcely available in the stalls. This would directly affect exports from local producers leading to lower exports. This results in a shrink in the international market. If the U. S government places high tariffs on phones imported from China, this could make U. S phone manufacturing companies more competitive hence safeguarding jobs in the phone industry. Similarly, it is evident that with the risk in management sector, one has to be an active member because ever since the president of the united states of American threatened to impose the 45% of the import duty from the Republic of China, He heeded warning that the tariffs are bound to hurt some of the domestic and consumers as well as benefiting some of the sectors in the business industry.

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The supply of some products such as consumer electronics and smartphone is now global in nature. Important to note, apart from the shift in manufacturing, most of the products are being supplied across the globe. For instance, close to 25% of the smartphone was produced for to be sold in the developed countries in 2006 but the number subsequently reduced by 7% after 4 years. In China, the technology is more reliant than any other sector. The manufacturer of the Apple phone cannot produce it without depending on the Chinese product, on the other hand, the Chinese can build the various devices using the methods of iPhone specs. Apple products are premeditated in California and then bring together in the Republic of China. Therefore, it is evident that China has become an important factor to apple because if it was not for the participation of the Chinese, the Apple industry would not have to produce the smartphones.

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So, in the event where there is trade war between US-China, the supply chain tends to decline thus increasing the cost of the phone whereby average consumer may find it to be more expensive and as a result of that, there will be change in the market dynamic and demand may increase or decrease depending on the purchasing power of the consumer. Clearly, a component of the supply chain in the smartphone industry is likely to cause a significant change in both the market and demand since other production and consumer depends on the two states engaging in the trade war. Analysis indicates that China tariffs affected diverse and significant vital elements that comprise important U. S. production bases which include technology firms. Chinese divided its tariffs into geographical locations and ensured it affected all political divides.

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Chinese tariffs were explicitly designed to affect President Trump’s vote base highly. American companies will be hurt by these and lead to laying off their workers. Entrenched workers are smartphone consumers but without earnings to buy thus affecting both countries economy. Main US technology firms which are operating in China are feeling the pressure from president Trump to relocate to the US to create jobs to and grow the economy. Proposed tariffs covered sectors such as information technology, aerospace, communication technology and aerospace. The United States is the biggest loser after the trade war. This has harmed both states and other global markets hence discussion is necessary to end the war. Retailers who import merchandises for China such as Walmart will be affected as prices of products will go up.

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The United States relied on China to get certain goods used for manufacturing industries and sold around the world. For Chinese producers and consumers, most of its exports are from foreign investors, therefore, would also be affected. As result prices of goods will go up and living standards of workers will become difficult. Tariffs introduced should not affect basic needs such as food and clothing as citizens of both states suffer. Bibliography Autor, David H. David Dorn, and Gordon H. Hanson. The china shock: Learning from labor- market adjustment to large changes in trade. L. Implications of the financial crisis for the US–China rivalry.  Survival, 52(4), 31-54. Jin, Jihong, and Michael Steffens. Factors Analysis of the Electronics Industry Trade Imbalance between the US and China. com/sites/ralphjennings/2018/04/12/how-a-u-s-china-trade-war-might-raise-apple-and-huawei-smartphone-prices/#6dc071eb7289 12 April 2018 Telecom Review “US-China trade war could hike up smartphone prices” http://www.

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telecomreviewasia. com/index. php/news/featured-articles/1007-us-china-trade-war-could-hike-up-smartphone-prices 11 April 2018 Trump, Donald. Reforming the US-China Trade Relationship to Mcake America Great Again.  World Patent Information, 46, 64-72. Walker, Christopher. The Hijacking of" Soft Power".  Journal of Democracy 27, no.

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